10-Q 1 itic20200331-10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

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

For the quarterly period ended March 31, 2020
OR

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

For the transition period from ___________________ to ___________________
Commission File Number: 0-11774
INVESTORS TITLE CO MPANY
(Exact name of registrant as specified in its charter)

| North Carolina |  |  |  | 56-1110199 |
| (State of incorporation) |  |  |  | (I.R.S. Employer Identification No.) |

121 North Columbia Street, Chapel Hill, North Carolina 27514
(Address of principal executive offices) (Zip Code)
(919) 968-2200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class |  | Trading symbol(s) |  | Name of each exchange on which registered
Common Stock, no par value |  | ITIC |  | The NASDAQ Stock Market LLC
Rights to Purchase Series A Junior Participating Preferred Stock |  |  |  | The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

| Large accelerated filer |  | ☐ |  | Accelerated filer |  | ☒ |
| Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☐ |
|  |  |  |  | Emerging growth company |  | ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 21, 2020, there were 1,891,181 common shares of the registrant outstanding.

INVESTORS TITLE COMPANY
AND SUBSIDIARIES
INDEX

PART I. | FINANCIAL INFORMATION |
Item 1. | Financial Statements: |
| Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 | 1
| Consolidated Statements of Operations For the Three Months Ended March 31, 2020 and 2019 | 2
| Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, 2020 and 2019 | 3
| Consolidated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2020 and 2019 | 4
| Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2020 and 2019 | 5
| Notes to Consolidated Financial Statements | 7
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 24
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 37
Item 4. | Controls and Procedures | 37
PART II. | OTHER INFORMATION |
Item 1. | Legal Proceeding s | 38
Item 1A. | Risk Factors | 38
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 38
Item 3. | Defaults Upon Senior Securities | 39
Item 4. | Mine Safety Disclosures | 39
Item 5. | Other Information | 39
Item 6. | Exhibits | 40
SIGNATURE |  | 41

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2020 and December 31, 2019
(in thousands)
(unaudited)

| March 31, 2020 |  | December 31, 2019
Assets |  |  |
Cash and cash equivalents | $ | 25,324 |  |  | $ | 25,949 |
Investments: |  |  |
Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2020: $97,390; December 31, 2019: $100,667) | 101,421 |  |  | 104,638 |
Equity securities, at fair value (cost: March 31, 2020: $34,903; December 31, 2019: $33,570) | 47,983 |  |  | 61,108 |
Short-term investments | 15,641 |  |  | 13,134 |
Other investments | 14,229 |  |  | 13,982 |
Total investments | 179,274 |  |  | 192,862 |
Premium and fees receivable | 12,330 |  |  | 12,523 |
Accrued interest and dividends | 1,243 |  |  | 1,033 |
Prepaid expenses and other receivables | 10,026 |  |  | 5,519 |
Property, net | 9,959 |  |  | 9,776 |
Goodwill and other intangible assets, net | 10,149 |  |  | 10,275 |
Operating lease right-of-use assets | 4,300 |  |  | 4,469 |
Other assets | 1,513 |  |  | 1,487 |
Total Assets | $ | 254,118 |  |  | $ | 263,893 |
Liabilities and Stockholders’ Equity |  |  |  |  |
Liabilities: |  |  |  |  |
Reserve for claims | $ | 31,407 |  |  | $ | 31,333 |
Accounts payable and accrued liabilities | 27,816 |  |  | 28,318 |
Operating lease liabilities | 4,337 |  |  | 4,502 |
Current income taxes payable | 2,921 |  |  | 1,340 |
Deferred income taxes, net | 3,990 |  |  | 7,038 |
Total liabilities | 70,471 |  |  | 72,531 |
Commitments and Contingencies | — |  |  | — |
Stockholders’ Equity: |  |  |  |  |
Preferred stock (1,000 authorized shares; no shares issued) | — |  |  | — |
Common stock – no par value (10,000 authorized shares; 1,891 and 1,889 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively, excluding in each period 292 shares of common stock held by the Company) | — |  |  | — |
Retained earnings | 180,535 |  |  | 188,262 |
Accumulated other comprehensive income | 3,112 |  |  | 3,100 |
Total stockholders' equity | 183,647 |  |  | 191,362 |
Total Liabilities and Stockholders’ Equity | $ | 254,118 |  |  | $ | 263,893 |

Refer to notes to the Consolidated Financial Statements.
1

Investors Title Company and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended March 31, 2020 and 2019
(in thousands, except per share amounts)
(unaudited)

| Three Months Ended March 31,
| 2020 |  | 2019
Revenues: |  |  |
Net premiums written | $ | 38,627 |  |  | $ | 28,795 |
Escrow and other title-related fees | 1,842 |  |  | 1,322 |
Non-title services | 2,547 |  |  | 2,388 |
Interest and dividends | 1,177 |  |  | 1,256 |
Other investment income | 440 |  |  | 410 |
Net realized investment (losses) gains | (412 | ) |  | 790 |
Changes in the estimated fair value of equity security investments | (14,458 | ) |  | 4,670 |
Other | 138 |  |  | 315 |
Total Revenues | 29,901 |  |  | 39,946 |
Operating Expenses: |  |  |
Commissions to agents | 20,187 |  |  | 15,058 |
Provision for claims | 906 |  |  | 226 |
Personnel expenses | 11,809 |  |  | 11,612 |
Office and technology expenses | 2,415 |  |  | 2,223 |
Other expenses | 3,113 |  |  | 2,514 |
Total Operating Expenses | 38,430 |  |  | 31,633 |
(Loss) Income before Income Taxes | (8,529 | ) |  | 8,313 |
(Benefit) Provision for Income Taxes | (1,518 | ) |  | 1,687 |
Net (Loss) Income | $ | (7,011 | ) |  | $ | 6,626 |
Basic (Loss) Earnings per Common Share | $ | (3.71 | ) |  | $ | 3.51 |
Weighted Average Shares Outstanding – Basic | 1,890 |  |  | 1,887 |
Diluted (Loss) Earnings per Common Share | $ | (3.71 | ) |  | $ | 3.49 |
Weighted Average Shares Outstanding – Diluted | 1,890 |  |  | 1,896 |

Refer to notes to the Consolidated Financial Statements.
2

Investors Title Company and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 2020 and 2019
(in thousands)
(unaudited)

| Three Months Ended March 31,
| 2020 |  | 2019
Net (loss) income | $ | (7,011 | ) |  | $ | 6,626 |
Other comprehensive income, before tax: |  |  |
Accumulated postretirement benefit obligation adjustment | (41 | ) |  | — |
Net unrealized (loss) gain on investments arising during the period | (391 | ) |  | 1,450 |
Reclassification adjustment for sale of securities included in net loss | (30 | ) |  | — |
Reclassification adjustment for write-down of securities included in net loss | 482 |  |  | — |
Other comprehensive income, before tax | 20 |  |  | 1,450 |
Income tax benefit related to postretirement health benefits | (9 | ) |  | — |
Income tax (benefit) expense related to net unrealized (loss) gain on investments arising during the period | (87 | ) |  | 307 |
Income tax benefit related to reclassification adjustment for sale of securities included in net loss | (6 | ) |  | — |
Income tax expense related to reclassification adjustment for write-down of securities included in net loss | 110 |  |  | — |
Net income tax expense on other comprehensive income | 8 |  |  | 307 |
Other comprehensive income | 12 |  |  | 1,143 |
Comprehensive (Loss) Income | $ | (6,999 | ) |  | $ | 7,769 |

Refer to notes to the Consolidated Financial Statements.
3

Investors Title Company and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2020 and 2019
(in thousands, except per share amounts)
(unaudited)

| Common Stock |  | Retained Earnings |  |  | Accumulated Other Comprehensive Income |  |  | Total Stockholders’ Equity |
| Shares |  | Amount |  |  |
Balance, January 1, 2019 | 1,887 |  |  | $ | — |  |  | $ | 174,690 |  |  | $ | 949 |  |  | $ | 175,639 |
Net income |  |  |  |  |  |  | 6,626 |  |  |  |  |  | 6,626 |
Dividends paid ($0.40 per share) |  |  |  |  |  |  | (755 | ) |  |  |  |  | (755 | )
Repurchases of common stock | — |  |  |  |  |  | (11 | ) |  |  |  |  | (11 | )
Exercise of stock appreciation rights | 2 |  |  |  |  |  | (1 | ) |  |  |  |  | (1 | )
Share-based compensation expense related to stock appreciation rights |  |  |  |  |  |  | 88 |  |  |  |  |  | 88 |
Net unrealized gain on investments |  |  |  |  |  |  |  |  |  | 1,143 |  |  | 1,143 |
Balance, March 31, 2019 | 1,889 |  |  | $ | — |  |  | $ | 180,637 |  |  | $ | 2,092 |  |  | $ | 182,729 |
Balance, January 1, 2020 | 1,889 |  |  | $ | — |  |  | $ | 188,262 |  |  | $ | 3,100 |  |  | $ | 191,362 |
Net loss |  |  |  |  |  |  | (7,011 | ) |  |  |  |  | (7,011 | )
Dividends paid ($0.44 per share) |  |  |  |  |  |  | (832 | ) |  |  |  |  | (832 | )
Exercise of stock appreciation rights | 2 |  |  |  |  |  | (1 | ) |  |  |  |  | (1 | )
Share-based compensation expense related to stock appreciation rights |  |  |  |  |  |  | 117 |  |  |  |  |  | 117 |
Accumulated postretirement benefit obligation adjustment |  |  |  |  |  |  | (32 | ) |  | (32 | )
Net unrealized gain on investments |  |  |  |  |  |  |  |  | 44 |  |  | 44 |
Balance, March 31, 2020 | 1,891 |  |  | $ | — |  |  | $ | 180,535 |  |  | $ | 3,112 |  |  | $ | 183,647 |

Refer to notes to the Consolidated Financial Statements.
4

Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2020 and 2019
(in thousands)
(unaudited)

|  | Three Months Ended March 31,
|  | 2020 |  | 2019
Operating Activities |  |  |  |
Net (loss) income |  | $ | (7,011 | ) |  | $ | 6,626 |
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |  |  |  |  |  |
Depreciation |  | 457 |  |  | 433 |
Amortization of investments, net |  | 248 |  |  | 133 |
Amortization of other intangible assets, net |  | 126 |  |  | 126 |
Share-based compensation expense related to stock appreciation rights |  | 117 |  |  | 88 |
Net gain on disposals of property |  | (2 | ) |  | (3 | )
Net realized investment losses (gains) |  | 412 |  |  | (790 | )
Net change in estimated fair value of equity security investments |  | 14,458 |  |  | (4,670 | )
Net earnings from other investments |  | (315 | ) |  | (208 | )
Provision for claims |  | 906 |  |  | 226 |
(Benefit) provision for deferred income taxes |  | (3,057 | ) |  | 828 |
Changes in assets and liabilities: |  |  |  |  |  |
Decrease in premium and fees receivables |  | 193 |  |  | 1,384 |
Increase in other assets |  | (4,743 | ) |  | (366 | )
Decrease (increase) in operating lease right-of-use assets |  | 169 |  |  | (4,925 | )
Decrease in accounts payable and accrued liabilities |  | (543 | ) |  | (4,944 | )
(Decrease) increase in operating lease liabilities |  | (165 | ) |  | 4,927 |
Increase in current income taxes payable |  | 1,581 |  |  | 859 |
Payments of claims, net of recoveries |  | (832 | ) |  | (571 | )
Net cash provided by (used in) operating activities |  | 1,999 |  |  | (847 | )
Investing Activities |  |  |  |  |  |
Purchases of equity securities |  | (5,866 | ) |  | (1,572 | )
Purchases of short-term investments |  | (3,540 | ) |  | (50,015 | )
Purchases of other investments |  | (328 | ) |  | (776 | )
Proceeds from sales and maturities of fixed maturity securities |  | 2,579 |  |  | 925 |
Proceeds from sales of equity securities |  | 4,557 |  |  | 1,561 |
Proceeds from sales and maturities of short-term investments |  | 1,034 |  |  | 53,224 |
Proceeds from sales and distributions of other investments |  | 401 |  |  | 1,843 |
Proceeds from sales of other assets |  | 10 |  |  | — |
Purchases of property |  | (643 | ) |  | (225 | )
Proceeds from the sale of property |  | 5 |  |  | 7 |
Net cash (used in) provided by investing activities |  | (1,791 | ) |  | 4,972 |
Financing Activities |  |  |  |  |  |
Repurchases of common stock |  | — |  |  | (11 | )
Exercise of stock appreciation rights |  | (1 | ) |  | (1 | )
Dividends paid |  | (832 | ) |  | (755 | )
Net cash used in financing activities |  | (833 | ) |  | (767 | )
Net (Decrease) Increase in Cash and Cash Equivalents |  | (625 | ) |  | 3,358 |
Cash and Cash Equivalents, Beginning of Period |  | 25,949 |  |  | 18,694 |
Cash and Cash Equivalents, End of Period |  | $ | 25,324 |  |  | $ | 22,052 |

5

Consolidated Statements of Cash Flows, continued |  |
|  | Three Months Ended March 31,
|  | 2020 |  | 2019
Supplemental Disclosures: |  |  |  |
Cash (Received) Paid During the Year for: |  |  |  |
Income tax refunds, net |  | $ | (42 | ) |  | $ | — |
Non Cash Investing and Financing Activities: |  |  |  |
Non cash net unrealized gain on investments, net of deferred tax provision of $(17) and $(307) for March 31, 2020 and 2019, respectively |  | $ | (44 | ) |  | $ | (1,143 | )
Adjustments to postretirement benefits obligation, net of deferred tax benefit of $9 and $0 for March 31, 2020 and 2019, respectively |  | $ | 32 |  |  | $ | — |

Refer to notes to the Consolidated Financial Statements.
6

INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2020
(unaudited)
Note 1 – Basis of Presentation and Significant Accounting Policies
Reference should be made to the “Notes to Consolidated Financial Statements” appearing in the Annual Report on Form 10-K for the year ended December 31, 2019 of Investors Title Company (the “Company”) for a complete description of the Company’s significant accounting policies.
Principles of Consolidation – The accompanying unaudited Consolidated Financial Statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information, with the instructions to Form 10-Q and with Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. All intercompany balances and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows of the Company in the accompanying unaudited Consolidated Financial Statements have been included. All such adjustments are of a normal recurring nature. Operating results for the three-month period ended March 31, 2020 are not necessarily indicative of the financial condition and results that may be expected for the year ending December 31, 2020 or any other interim period.
Use of Estimates and Assumptions – The preparation of the Company’s Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used.
Subsequent Events – The Company has evaluated and concluded that there were no material subsequent events requiring adjustment or disclosure to its Consolidated Financial Statements.
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 updated guidance to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The update broadened the information that an entity must consider in developing its expected credit loss estimates, and was meant to better reflect an entity’s current estimate of all expected credit losses. In addition, this update amended the accounting for credit losses on available-for-sale fixed maturity securities and purchased financial assets with credit deterioration. The update was effective for the Company for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this update on January 1, 2020 with no material impact on the Company's financial position and results of operations. Refer to Note 6 for further information about the Company's investments.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update removed the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity is required to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and must recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized must not exceed the total amount of goodwill allocated to that reporting unit. In addition, the ASU clarified that an entity is required to consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The update was effective for the Company for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted this update on January 1, 2020 with no impact on the Company's financial position and results of operations.
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to reduce the complexity in accounting for income taxes during interim and annual periods and is expected to provide clarity on income tax situations where a diversity in practice has developed. The update is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual periods for which financial statements have not yet been issued. None of these amendments are expected to have a material impact on the Company's financial position or results of operations.
7

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). This update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative immediately before applying or upon discontinuing the equity method. In addition, this update clarifies that, when determining the accounting for certain forward contracts and purchased options, a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. The update is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted, including early adoption in an interim period, for periods for which financial statements have not yet been issued. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, and does not expect it to have a material impact.
Significant Accounting Policies – The Company has updated the following accounting policies due to the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):
Allowance for Credit Losses – Available-for-Sale Securities
For available-for-sale fixed maturity securities in an unrealized loss position, the Company evaluates the securities to determine whether the decline in the estimated fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses (“ACL”) on the Consolidated Balance Sheets, limited to the amount by which the amortized cost basis exceeds the estimated fair value, with a corresponding adjustment to earnings. Both the ACL and the adjustment to the Consolidated Statements of Operations may be reversed if conditions change. However, if the Company intends to sell an impaired available-for-sale fixed maturity security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount must be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to estimated fair value, there is no ACL in this situation.
In evaluating available-for-sale fixed maturity securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which estimated fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition, among other factors.
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the ACL when management believes the uncollectability of an available-for-sale fixed maturity security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Accrued interest receivable is excluded from the estimate of credit losses.
Note 2 – Reserve for Claims
Activity in the reserve for claims for the three-month period ended March 31, 2020 and the year ended December 31, 2019 are summarized as follows:

(in thousands) | March 31, 2020 |  | December 31, 2019
Balance, beginning of period | $ | 31,333 |  |  | $ | 31,729 |
Provision charged to operations | 906 |  |  | 3,532 |
Payments of claims, net of recoveries | (832 | ) |  | (3,928 | )
Balance, end of period | $ | 31,407 |  |  | $ | 31,333 |

The total reserve for all reported and unreported losses the Company incurred through March 31, 2020 is represented by the reserve for claims on the Consolidated Balance Sheets. The Company's reserves for unpaid losses and loss adjustment expenses are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy claims that have been incurred but not yet reported (“IBNR”). Despite the variability of such estimates, management believes that the total reserve for claims is adequate to cover claim losses which might result from pending and future claims under title insurance policies issued through March 31, 2020. Management continually reviews and adjusts its reserve for claims estimates to reflect its loss experience and any new information that becomes available. Adjustments resulting from such reviews could be significant.
8

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

(in thousands, except percentages) | March 31, 2020 |  | % |  | December 31, 2019 |  | %
Known title claims | $ | 3,596 |  |  | 11.4 |  | $ | 3,799 |  |  | 12.1
IBNR | 27,811 |  |  | 88.6 |  | 27,534 |  |  | 87.9
Total reserve for claims | $ | 31,407 |  |  | 100.0 |  | $ | 31,333 |  |  | 100.0

Claims and losses paid are charged to the reserve for claims. Although claims losses are typically paid in cash, occasionally claims are settled by purchasing the interest of the insured or the claimant in the real property. When this event occurs, the Company carries assets at the lower of cost or estimated fair value, net of any indebtedness on the property.
Note 3 – Earnings Per Common Share and Share Awards
Basic (loss) earnings per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the reporting period. Diluted (loss) earnings per common share is computed by dividing net (loss) income by the combination of dilutive potential common stock, comprised of shares issuable under the Company’s share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, as share-based awards are exercised, (a) the exercise price of a share-based award and (b) the amount of compensation cost, if any, for future services that the Company has not yet recognized, are assumed to be used to repurchase shares in the current period.
The following table sets forth the computation of basic and diluted (loss) earnings per share for the three-month periods ended March 31:

|  | Three Months Ended March 31,
(in thousands, except per share amounts) |  | 2020 |  | 2019
Net (loss) income |  | $ | (7,011 | ) |  | $ | 6,626 |
Weighted average common shares outstanding – Basic |  | 1,890 |  |  | 1,887 |
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled) |  | — |  |  | 9 |
Weighted average common shares outstanding – Diluted |  | 1,890 |  |  | 1,896 |
Basic (loss) earnings per common share |  | $ | (3.71 | ) |  | $ | 3.51 |
Diluted (loss) earnings per common share |  | $ | (3.71 | ) |  | $ | 3.49 |

There were 15 thousand and 9 thousand potential shares excluded from the computation of diluted (loss) earnings per share for the three-month periods ended March 31, 2020 and 2019, respectively, due to the out-of-the-money status of the related share-based awards. Diluted loss per share is comparable to basic loss per share when an organization is in a net loss situation, like the Company was for the three-month period ended March 31, 2020, as the impact to loss per share from share awards is antidilutive.
The Company historically has adopted employee stock award plans under which restricted stock, options or stock appreciation rights ("SARs") exercisable for the Company's stock may be granted to key employees or directors of the Company. There is currently one active plan from which the Company may grant share-based awards. The awards eligible to be granted under the active plan are limited to SARs, and the maximum aggregate number of shares of common stock of the Company available pursuant to the plan for the grant of SARs is 250 thousand shares.
As of March 31, 2020, the only outstanding awards under the plans were SARs, which expire within seven years or less from the date of grant. Most outstanding SARs vest and are exercisable within one year of the date of grant, with the exception of a one-time grant where the SARs vest over a five-year period. All SARs issued to date have been share-settled only. There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.
There was approximately $118 thousand and $88 thousand of compensation expense relating to SARs vesting on or before March 31, 2020 and 2019, respectively, included in personnel expenses in the Consolidated Statements of Operations. As of March 31, 2020, there was $171 thousand of unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s stock award plans.
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A summary of share-based award transactions for all share-based award plans follows:

(in thousands, except weighted average exercise price and average remaining contractual term) | Number Of Shares |  | Weighted Average Exercise Price |  | Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value
Outstanding as of January 1, 2019 | 28 |  |  | $ | 110.27 |  |  | 3.64 |  | $ | 2,019 |
SARs granted | 4 |  |  | 162.81 |  |  |  |  |  |
SARs exercised | (2 | ) |  | 50.50 |  |  |  |  |  |
Outstanding as of December 31, 2019 | 30 |  |  | $ | 124.13 |  |  | 3.53 |  | $ | 1,352 |
SARs granted | 7 |  |  | 143.53 |  |  |  |  |  |
SARs exercised | (5 | ) |  | 74.87 |  |  |  |  |  |
Outstanding as of March 31, 2020 | 32 |  |  | $ | 135.47 |  |  | 4.33 |  | $ | 585 |
Exercisable as of March 31, 2020 | 27 |  |  | $ | 135.02 |  |  | 3.83 |  | $ | 585 |
Unvested as of March 31, 2020 | 5 |  |  | $ | 137.90 |  |  | 6.96 |  | $ | — |

During the first quarter of 2020 the Company issued 7 thousand share-settled SARs to directors and employees of the Company. There were no such issuances in the first quarter of 2019, as all 2019 issuances of share-settled SARs were made in the second quarter. SARs give the holder the right to receive stock equal to the appreciation in the value of shares of stock from the grant date for a specified period of time, and as a result, are accounted for as equity instruments. The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions noted in the table shown below. Expected volatilities are based on both the implied and historical volatility of the Company’s stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate assumed for the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant. The weighted average fair value for the SARs issued during first quarter 2020 was $35.49 and was estimated using the weighted average assumptions shown in the table below.

| 2020
Expected Life in Years | 6.2 - 7.0
Volatility | 27.2%
Interest Rate | 0.8%
Yield Rate | 1.0%

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Note 4 – Segment Information
The Company has one reportable segment, title insurance services. The remaining immaterial segments have been combined into a group called “All Other.”
The title insurance segment primarily issues title insurance policies through approved attorneys from underwriting offices and through independent issuing agents. Title insurance policies insure titles to real estate.
Provided below is selected financial information about the Company's operations by segment for the periods ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020 (in thousands) | Title Insurance |  | All Other |  | Intersegment Eliminations |  | Total
Insurance and other services revenues | $ | 41,853 |  |  | $ | 2,805 |  |  | $ | (1,504 | ) |  | $ | 43,154 |
Investment loss | (11,460 | ) |  | (1,381 | ) |  | — |  |  | (12,841 | )
Net realized gain (loss) on investments | 63 |  |  | (475 | ) |  | — |  |  | (412 | )
Total revenues | $ | 30,456 |  |  | $ | 949 |  |  | $ | (1,504 | ) |  | $ | 29,901 |
Operating expenses | 37,443 |  |  | 2,345 |  |  | (1,358 | ) |  | 38,430 |
Loss before income taxes | $ | (6,987 | ) |  | $ | (1,396 | ) |  | $ | (146 | ) |  | $ | (8,529 | )
Total assets | $ | 187,236 |  |  | $ | 66,882 |  |  | $ | — |  |  | $ | 254,118 |

Three Months Ended March 31, 2019 (in thousands) | Title Insurance |  | All Other |  | Intersegment Eliminations |  | Total
Insurance and other services revenues | $ | 31,319 |  |  | $ | 2,691 |  |  | $ | (1,190 | ) |  | $ | 32,820 |
Investment income | 5,430 |  |  | 906 |  |  | — |  |  | 6,336 |
Net realized gain on investments | 764 |  |  | 26 |  |  | — |  |  | 790 |
Total revenues | $ | 37,513 |  |  | $ | 3,623 |  |  | $ | (1,190 | ) |  | $ | 39,946 |
Operating expenses | 30,452 |  |  | 2,237 |  |  | (1,056 | ) |  | 31,633 |
Income before income taxes | $ | 7,061 |  |  | $ | 1,386 |  |  | $ | (134 | ) |  | $ | 8,313 |
Total assets | $ | 200,187 |  |  | $ | 52,803 |  |  | $ | — |  |  | $ | 252,990 |

Note 5 – Retirement Agreements and Other Postretirement Benefits
The Company’s subsidiary, Investors Title Insurance Company ("ITIC"), is a party to employment agreements with key executives that provide for the continuation of certain employee benefits and other payments due under the agreements upon retirement, estimated to total $12.3 million and $12.2 million as of March 31, 2020 and December 31, 2019, respectively. The executive employee benefits include health, dental, vision and life insurance and are unfunded. These amounts are classified as accounts payable and accrued liabilities in the Consolidated Balance Sheets. The following sets forth the net periodic benefit cost for the executive benefits for the periods ended March 31, 2020 and 2019:

| Three Months Ended March 31,
(in thousands) | 2020 |  | 2019
Service cost – benefits earned during the year | $ | — |  |  | $ | — |
Interest cost on the projected benefit obligation | 8 |  |  | 8 |
Amortization of unrecognized losses | — |  |  | — |
Net periodic benefit cost | $ | 8 |  |  | $ | 8 |

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Note 6 – Investments and Estimated Fair Value
Investments in Fixed Maturity Securities
The estimated fair value, gross unrealized holding gains, gross unrealized holding losses and amortized cost for fixed maturity securities by major classification are as follows:

As of March 31, 2020 (in thousands) | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value: |  |  |  |  |  |  |
Government obligations | $ | 24,126 |  |  | $ | 335 |  |  | $ | — |  |  | $ | 24,461 |
General obligations of U.S. states, territories and political subdivisions | 18,565 |  |  | 835 |  |  | — |  |  | 19,400 |
Special revenue issuer obligations of U.S. states, territories and political subdivisions | 50,758 |  |  | 2,455 |  |  | 12 |  |  | 53,201 |
Corporate debt securities | 3,941 |  |  | 451 |  |  | 33 |  |  | 4,359 |
Total | $ | 97,390 |  |  | $ | 4,076 |  |  | $ | 45 |  |  | $ | 101,421 |

As of December 31, 2019 (in thousands) | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value: |  |  |  |  |  |  |
Government obligations | $ | 25,161 |  |  | $ | 6 |  |  | $ | 4 |  |  | $ | 25,163 |
General obligations of U.S. states, territories and political subdivisions | 18,887 |  |  | 843 |  |  | — |  |  | 19,730 |
Special revenue issuer obligations of U.S. states, territories and political subdivisions | 51,188 |  |  | 2,530 |  |  | 20 |  |  | 53,698 |
Corporate debt securities | 5,431 |  |  | 621 |  |  | 5 |  |  | 6,047 |
Total | $ | 100,667 |  |  | $ | 4,000 |  |  | $ | 29 |  |  | $ | 104,638 |

The special revenue category for both periods presented includes approximately 50 individual fixed maturity securities with revenue sources from a variety of industry sectors.
The scheduled maturities of fixed maturity securities at March 31, 2020 are as follows:

| Available-for-Sale
(in thousands) | Amortized Cost |  | Estimated Fair Value
Due in one year or less | $ | 20,293 |  |  | $ | 20,465 |
Due one year through five years | 51,783 |  |  | 53,970 |
Due five years through ten years | 24,501 |  |  | 25,772 |
Due after ten years | 813 |  |  | 1,214 |
Total | $ | 97,390 |  |  | $ | 101,421 |

Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.
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The following table presents the gross unrealized losses on fixed maturity securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at March 31, 2020 and December 31, 2019:

| Less than 12 Months |  | 12 Months or Longer |  | Total
As of March 31, 2020 (in thousands) | Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses
Special revenue issuer obligations of U.S. states, territories and political subdivisions | $ | 1,573 |  |  | $ | (10 | ) |  | $ | 1,114 |  |  | $ | (2 | ) |  | $ | 2,687 |  |  | $ | (12 | )
Corporate debt securities | 640 |  |  | (33 | ) |  | — |  |  | — |  |  | 640 |  |  | (33 | )
Total temporarily impaired securities | $ | 2,213 |  |  | $ | (43 | ) |  | $ | 1,114 |  |  | $ | (2 | ) |  | $ | 3,327 |  |  | $ | (45 | )

| Less than 12 Months |  | 12 Months or Longer |  | Total
As of December 31, 2019 (in thousands) | Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses |  | Estimated Fair Value |  | Unrealized Losses
Government obligations | $ | 12,045 |  |  | $ | (4 | ) |  | $ | — |  |  | $ | — |  |  | $ | 12,045 |  |  | $ | (4 | )
Special revenue issuer obligations of U.S. states, territories and political subdivisions | 1,101 |  |  | (17 | ) |  | 1,118 |  |  | (3 | ) |  | 2,219 |  |  | (20 | )
Corporate debt securities | 413 |  |  | (5 | ) |  | — |  |  | — |  |  | 413 |  |  | (5 | )
Total temporarily impaired securities | $ | 13,559 |  |  | $ | (26 | ) |  | $ | 1,118 |  |  | $ | (3 | ) |  | $ | 14,677 |  |  | $ | (29 | )

The decline in estimated fair value of the fixed maturity securities can be attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Because the Company does not have the intent to sell these securities and will likely not be compelled to sell them before it can recover its cost basis, the Company does not consider these investments to be other-than-temporarily impaired.
Management evaluates available-for-sale fixed maturity securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.
Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been below cost, the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 9 and 6 fixed maturity securities had unrealized losses without an allowance for credit losses at March 31, 2020 and December 31, 2019, respectively. The Company does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. The Company believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore the unrealized loss is recorded in accumulated other comprehensive income.
Reviews of the values of fixed maturity securities are inherently uncertain and the value of the investment may not fully recover, or may decline in future periods resulting in a realized loss. The Company recorded $482 thousand and $0 other-than-temporary impairment charges related to fixed maturity securities for the three-month periods ended March 31, 2020 and 2019, respectively. Expenses related to other-than-temporary impairments are recorded in net realized investment (losses) gains in the Consolidated Statements of Operations when recognized.
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Investments in Equity Securities
The cost and estimated fair value of equity securities are as follows:

As of March 31, 2020 (in thousands) | Cost |  | Estimated Fair Value
Equity securities, at fair value: |  |  |  |  |
Common stocks | $ | 34,903 |  |  | $ | 47,983 |
Total | $ | 34,903 |  |  | $ | 47,983 |

As of December 31, 2019 (in thousands) | Cost |  | Estimated Fair Value
Equity securities, at fair value: |  |  |  |  |
Common stocks | $ | 33,570 |  |  | $ | 61,108 |
Total | $ | 33,570 |  |  | $ | 61,108 |

Unrealized holding gains and losses are reported in the Consolidated Statements of Operations as changes in the estimated fair value of equity security investments.
Net Realized Investment (Losses) Gains
Gross realized gains and losses on sales of investments for the three-month periods ended March 31 are summarized as follows:

(in thousands) | 2020 |  | 2019
Gross realized gains from securities: |  |  |  |  |
Corporate debt securities | $ | 30 |  |  | $ | — |
Common stocks | 747 |  |  | 831 |
Total | $ | 777 |  |  | $ | 831 |
Gross realized losses from securities: |  |  |  |  |
Common stocks | $ | (722 | ) |  | $ | (41 | )
Other-than-temporary impairment of securities | (482 | ) |  | — |
Total | $ | (1,204 | ) |  | $ | (41 | )
Net realized (losses) gains from securities | $ | (427 | ) |  | $ | 790 |
Net realized gains on other investments: |  |  |
Gains on other investments | $ | 20 |  |  | $ | — |
Net loss on other assets and investments | (5 | ) |  | — |
Total | $ | 15 |  |  | $ | — |
Net realized investment (losses) gains | $ | (412 | ) |  | $ | 790 |

Realized gains and losses are determined on the specific identification method.
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Variable Interest Entities
The Company holds investments in variable interest entities ("VIEs") that are not consolidated in the Company's financial statements as the Company is not the primary beneficiary. These entities are considered VIEs as the equity investors at risk, including the Company, do not have the power over the activities that most significantly impact the economic performance of the entities; this power resides with a third-party general partner or managing member that cannot be removed except for cause. The following table sets forth details about the Company's variable interest investments in VIEs, which are structured either as limited partnerships ("LPs") or limited liability companies ("LLCs"), as of March 31, 2020:

(in thousands) |  | Balance Sheet Classification |  | Carrying Value |  | Estimated Fair Value |  | Maximum Potential Loss (a)
Tax credit LPs |  | Other investments |  | $ | 223 |  |  | $ | 223 |  |  | $ | 1,768 |
Real estate LLCs or LPs |  | Other investments |  | 5,390 |  |  | 6,231 |  |  | 6,675 |
Small business investment LPs |  | Other investments |  | 6,516 |  |  | 6,311 |  |  | 8,955 |
Total |  |  |  | $ | 12,129 |  |  | $ | 12,765 |  |  | $ | 17,398 |

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

Valuation of Financial Assets
The FASB has established a valuation hierarchy for disclosure of the inputs used to measure estimated fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.
A financial instrument’s classification within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement – consequently, if there are multiple significant valuation inputs that are categorized in different levels of the hierarchy, the instrument’s hierarchy level is the lowest level (with Level 3 being the lowest level) within which any significant input falls.
The Level 1 category includes equity securities and U.S. Treasury securities that are measured at estimated fair value using quoted active market prices.
The Level 2 category includes fixed maturity securities such as corporate debt securities, U.S. government obligations, and obligations of U.S. states, territories, and political subdivisions. Estimated fair value is principally based on market values obtained from a third-party pricing service. Factors that are used in determining estimated fair market value include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. The Company receives one quote per security from a third-party pricing service, although as discussed below, the Company does consult other pricing resources when confirming that the prices it obtains reflect the fair values of the instruments in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of March 31, 2020 and December 31, 2019, the Company did not adjust any Level 2 fair values.
A number of the Company’s investment grade corporate debt securities are frequently traded in active markets, and trading prices are consequently available for these securities. However, these securities are classified as Level 2 because the pricing service from which the Company has obtained estimated fair values for these instruments uses valuation models that use observable market inputs in addition to trading prices. Substantially all of the input assumptions used in the service’s model are observable in the marketplace or can be derived or supported by observable market data.
In the measurement of the estimated fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, ASC 820 excludes from its scope certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments.
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In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions:
Cash and cash equivalents
The carrying amount for cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity of these investments.
Measurement alternative equity investments
The measurement alternative method requires investments without readily determinable fair values to be recorded at cost, less impairments, and plus or minus any changes resulting from observable price changes. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments.
Accrued interest and dividends
The carrying amount for accrued interest and dividends is a reasonable estimate of fair value due to the short-term maturity of these assets.
The following table presents, by level, fixed maturity securities carried at estimated fair value as of March 31, 2020 and December 31, 2019:

As of March 31, 2020 (in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |
Obligations of U.S. states, territories and political subdivisions* | $ | 24,461 |  |  | $ | 72,601 |  |  | $ | — |  |  | $ | 97,062 |
Corporate debt securities* | — |  |  | 4,359 |  |  | — |  |  | 4,359 |
Total | $ | 24,461 |  |  | $ | 76,960 |  |  | $ | — |  |  | $ | 101,421 |

As of December 31, 2019 (in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Fixed maturity securities: |  |  |  |  |  |  |
Obligations of U.S. states, territories and political subdivisions* | $ | 24,160 |  |  | $ | 74,431 |  |  | $ | — |  |  | $ | 98,591 |
Corporate debt securities* | — |  |  | 6,047 |  |  | — |  |  | 6,047 |
Total | $ | 24,160 |  |  | $ | 80,478 |  |  | $ | — |  |  | $ | 104,638 |

*Denotes fair market value obtained from pricing services.
The following table presents, by level, estimated fair values of equity investments and other financial instruments as of March 31, 2020 and December 31, 2019:

As of March 31, 2020 (in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial assets: |  |  |  |  |  |  |
Cash and cash equivalents | $ | 25,324 |  |  | $ | — |  |  | $ | — |  |  | $ | 25,324 |
Accrued interest and dividends | 1,243 |  |  | — |  |  | — |  |  | 1,243 |
Equity securities, at fair value: |  |  |  |  |  |  |
Common stocks | 47,983 |  |  | — |  |  | — |  |  | 47,983 |
Short-term investments: |  |  |  |  |  |  |  |
Money market funds and certificates of deposit | 15,641 |  |  | — |  |  | — |  |  | 15,641 |
Other investments: |  |  |  |  |  |  |
Equity investments in unconsolidated affiliates, equity method | — |  |  | — |  |  | 6,080 |  |  | 6,080 |
Equity investments in unconsolidated affiliates, measurement alternative | — |  |  | — |  |  | 8,149 |  |  | 8,149 |
Total | $ | 90,191 |  |  | $ | — |  |  | $ | 14,229 |  |  | $ | 104,420 |

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As of December 31, 2019 (in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial assets: |  |  |  |  |  |  |
Cash and cash equivalents | $ | 25,949 |  |  | $ | — |  |  | $ | — |  |  | $ | 25,949 |
Accrued interest and dividends | 1,033 |  |  | — |  |  | — |  |  | 1,033 |
Equity securities, at fair value: |  |  |  |  |  |  |
Common stocks | 61,108 |  |  | — |  |  | — |  |  | 61,108 |
Short-term investments: |  |  |  |  |  |  |
Money market funds and certificates of deposit | 13,134 |  |  | — |  |  | — |  |  | 13,134 |
Other investments: |  |  |  |  |  |  |
Equity investments in unconsolidated affiliates, equity method | — |  |  | — |  |  | 6,083 |  |  | 6,083 |
Equity investments in unconsolidated affiliates, measurement alternative | — |  |  | — |  |  | 7,899 |  |  | 7,899 |
Total | $ | 101,224 |  |  | $ | — |  |  | $ | 13,982 |  |  | $ | 115,206 |

The Company did not hold any Level 3 category debt or marketable equity investment securities as of March 31, 2020 or December 31, 2019.
There were no transfers into or out of Levels 1, 2 or 3 during the periods presented.
To help ensure that estimated fair value determinations are consistent with ASC 820, prices from our pricing services go through multiple review processes to ensure appropriate pricing. Pricing procedures and inputs used to price each security include, but are not limited to, the following: unadjusted quoted market prices for identical securities such as stock market closing prices; non-binding quoted prices for identical securities in markets that are not active; interest rates; yield curves observable at commonly quoted intervals; volatility; prepayment speeds; loss severity; credit risks; and default rates. The Company reviews the procedures and inputs used by its pricing services, and verifies a sample of the services’ quotes by comparing them to values obtained from other pricing resources. In the event the Company disagrees with a price provided by its pricing services, the respective service reevaluates the price to corroborate the market information and then reviews inputs to the evaluation in light of potentially new market data. The Company believes that these processes and inputs result in appropriate classifications and estimated fair values consistent with ASC 820.
Certain equity investments under the measurement alternative are measured at estimated fair value on a non-recurring basis and are reviewed for impairment quarterly. If any such investment is determined to be other-than-temporarily impaired, an impairment charge is recorded against such investment and reflected in the Consolidated Statements of Operations. There were no impairments of such investments made during the three-month period ended March 31, 2020 or the twelve-month period ended December 31, 2019. The following table presents a rollforward of equity investments under the measurement alternative as of March 31, 2020 and December 31, 2019:

(in thousands) | Balance, January 1, 2020 |  | Amounts Impaired |  | Observable Changes |  | Purchases and Additional Commitments Paid |  | Sales, Returns of Capital and Other Reductions |  | Balance, March 31, 2020
Other investments: |  |  |  |  |  |  |  |  |  |  |
Equity investments in unconsolidated affiliates, measurement alternative | $ | 7,899 |  |  | $ | — |  |  | $ | — |  |  | $ | 250 |  |  | $ | — |  |  | $ | 8,149 |
Total | $ | 7,899 |  |  | $ | — |  |  | $ | — |  |  | $ | 250 |  |  | $ | — |  |  | $ | 8,149 |

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(in thousands) | Balance, January 1, 2019 |  | Amounts Impaired |  | Observable Changes |  | Purchases and Additional Commitments Paid |  | Sales, Returns of Capital and Other Reductions |  | Balance, December 31, 2019
Other investments: |  |  |  |  |  |  |  |  |  |  |
Equity investments in unconsolidated affiliates, measurement alternative | $ | 6,589 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,241 |  |  | $ | (931 | ) |  | $ | 7,899 |
Total | $ | 6,589 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,241 |  |  | $ | (931 | ) |  | $ | 7,899 |

Note 7 – Commitments and Contingencies
Legal Proceedings – The Company and its subsidiaries are involved in legal proceedings that are incidental to their business. In the Company’s opinion, based on the present status of these proceedings, any potential liability of the Company or its subsidiaries with respect to these legal proceedings, will not, in the aggregate, be material to the Company’s consolidated financial condition or operations.
Regulation – The Company’s title insurance and trust subsidiaries are regulated by various federal, state and local governmental agencies and are subject to various audits, examinations, and inquiries. It is the opinion of management based on its present expectations that findings from these audits, examinations, and inquiries will not have a material impact on the Company’s consolidated financial condition or results of operations.
Escrow and Trust Deposits – As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest money received under real estate contracts, escrowed funds received under escrow agreements, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of these deposits.
Like-Kind Exchanges Proceeds – In administering tax-deferred property exchanges, the Company’s subsidiary, Investors Title Exchange Corporation (“ITEC”), serves as a qualified intermediary for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. Another Company subsidiary, Investors Title Accommodation Corporation (“ITAC”), serves as exchange accommodation titleholder and, through limited liability companies that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property totaled approximately $223.6 million and $214.6 million as of March 31, 2020 and December 31, 2019, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated Balance Sheets; however, the Company remains contingently liable for transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon interest rate. Exchange services revenues include earnings on these deposits; therefore, investment income is included as a component of non-title services on the Consolidated Statements of Operations rather than other investment income. Like-kind exchange funds are primarily invested in money market and other short-term investments.
COVID-19 – An outbreak of a coronavirus ("COVID-19" or "the virus") has emerged and in March 2020 the World Health Organization declared it a pandemic. This contagious disease outbreak has continued to spread across the globe and is impacting worldwide economic activity and financial markets. The pandemic has had a negative impact on the real estate market and the value of marketable securities, including those held by the Company. In response, the U.S. government and its agencies have taken a number of significant measures to provide monetary stimulus. Such actions include an unscheduled cut to the federal funds rate, the introduction of new programs to preserve market liquidity, extended unemployment and sick leave benefits, low-interest loans for working capital access and payroll assistance, and other relief measures for both workers and businesses. The Company is fully operational and has not had any reductions in workforce. A large portion of the Company's workforce is performing their job functions remotely. The Company has not taken stimulus relief funding or added any other forms of debt.
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Note 8 – Related Party Transactions
The Company does business with, and has investments in, unconsolidated limited liability companies that are primarily title insurance agencies. The Company utilizes the equity method to account for its investment in these limited liability companies. The following tables set forth the approximate values by year found within each financial statement classification:

Financial Statement Classification, Consolidated Balance Sheets (in thousands) | As of March 31, 2020 | As of December 31, 2019
Other investments | $ | 6,080 |  | $ | 6,083 |
Premium and fees receivable | $ | 434 |  | $ | 410 |

| Financial Statement Classification, Consolidated Statements of Operations (in thousands) | Three Months Ended March 31,
| 2020 | 2019
| Net premiums written | $ | 4,057 |  | $ | 3,119 |
| Non-title services and other investment income | $ | 502 |  | $ | 473 |
| Commissions to agents | $ | 2,679 |  | $ | 2,073 |

Note 9 – Intangible Assets, Goodwill and Title Plant
Intangible Assets
The estimated fair values of intangible assets recognized as the result of title insurance agency acquisitions, all Level 3 inputs, are principally based on values obtained from an independent third-party valuation service. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2020 and 2019 that would indicate the carrying amounts may not be recoverable, and therefore determined that no identifiable intangible assets were impaired.
Identifiable intangible assets consist of the following:

(in thousands) | As of March 31, 2020 | As of December 31, 2019
Referral relationships | $ | 6,416 |  | $ | 6,416 |
Non-compete agreements | 1,406 |  | 1,406 |
Tradename | 560 |  | 560 |
Total | 8,382 |  | 8,382 |
Accumulated amortization | (2,583 | ) | (2,456 | )
Identifiable intangible assets, net | $ | 5,799 |  | $ | 5,926 |

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

Year Ended (in thousands) |
2020 | $ | 378 |
2021 | 562 |
2022 | 525 |
2023 | 525 |
2024 | 473 |
Thereafter | 3,336 |
Total | $ | 5,799 |

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Goodwill and Title Plant
As of March 31, 2020, the Company recognized $4.4 million in goodwill and $690 thousand in a title plant, net of impairments, as the result of title insurance agency acquisitions. The title plant is included with other assets in the Consolidated Balance Sheets. The fair values of goodwill and the title plant, both Level 3 inputs, are principally based on values obtained from an independent third-party valuation service as of the date of acquisition. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2020 and 2019 that would indicate the carrying amounts may not be recoverable, and therefore determined that neither goodwill nor the title plant were impaired.
Note 10 – Accumulated Other Comprehensive Income
The following tables provide changes in the balances of each component of accumulated other comprehensive income, net of tax, for the periods ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020 (in thousands) | Unrealized Gains and Losses On Available-for-Sale Securities |  | Postretirement Benefits Plans |  | Total
Beginning balance at January 1 | $ | 3,132 |  |  | $ | (32 | ) |  | $ | 3,100 |
Other comprehensive loss before reclassifications | (304 | ) |  | (32 | ) |  | (336 | )
Amounts reclassified from accumulated other comprehensive income | 348 |  |  | — |  |  | 348 |
Net current-period other comprehensive income (loss) | 44 |  |  | (32 | ) |  | 12 |
Ending balance | $ | 3,176 |  |  | $ | (64 | ) |  | $ | 3,112 |

Three Months Ended March 31, 2019 (in thousands) | Unrealized Gains and Losses On Available-for-Sale Securities |  | Postretirement Benefits Plans |  | Total
Beginning balance at January 1 | $ | 981 |  |  | $ | (32 | ) |  | $ | 949 |
Other comprehensive income before reclassifications | 1,143 |  |  | — |  |  | 1,143 |
Amounts reclassified from accumulated other comprehensive income | — |  |  | — |  |  | — |
Net current-period other comprehensive income | 1,143 |  |  | — |  |  | 1,143 |
Ending balance | $ | 2,124 |  |  | $ | (32 | ) |  | $ | 2,092 |

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The following table provides significant amounts reclassified out of each component of accumulated other comprehensive income for the three-month period ended March 31, 2020:

Three Months Ended March 31, 2020 |  |  |
Details about Accumulated Other Comprehensive Income Components (in thousands) | Amount Reclassified from Accumulated Other Comprehensive Income |  | Affected Line Item in the Consolidated Statements of Operations
Unrealized gains (losses) on available-for-sale securities: |  |  |
Net realized gain on investments | $ | 30 |  |  |
Other-than-temporary impairments | (482 | ) |  |
Total | $ | (452 | ) |  | Net realized investment (losses) gains
Tax | 104 |  |  | (Benefit) provision for income taxes
Net of Tax | $ | (348 | ) |  |
Reclassifications for the period | $ | (348 | ) |  |

There were no amounts reclassified out of each component of accumulated other comprehensive income for the three-month period ended March 31, 2019.
Note 11 – Revenue from Contracts with Customers
ASU 2014-09, Revenue from Contracts with Customers (Topic 606) requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance does not apply to revenue associated with insurance contracts (including title insurance policies), financial instruments and lease contracts; and therefore is primarily applicable to the following Company revenue categories.
Escrow and other title-related fees – The Company’s title segment recognizes commission revenue and fees related to items such as searches, settlements, commitments and other ancillary services. Escrow and other title-related fees are recognized as revenue at the time of the related transactions as the earnings process, or performance obligation, is then considered to be complete.
Non-title services – Through various subsidiaries, the Company offers management services, tax-deferred real property exchange services, investment management and trust services. Nonrefundable exchange fees are recognized as revenue upon receipt of the funds, which is at the time of closing of the initial sale of property. All other non-title service fees are recognized as revenue as performance obligations are completed.
Other – The Company occasionally recognizes revenue from other miscellaneous contracts which can include, but is not limited to seminar and education registration fees and software licensing contracts. These revenue streams are deemed immaterial to the operations of the Company, and revenue is recognized when, or as, performance obligations are completed.
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The following table provides a breakdown of the Company’s revenue by major business activity:

| Three Months Ended March 31,
(in thousands) | 2020 | 2019
Revenue from contracts with customers: |  |
Escrow and other title-related fees | $ | 1,842 |  | $ | 1,322 |
Non-title services | 2,547 |  | 2,388 |
Total revenue from contracts with customers | 4,389 |  | 3,710 |
Other sources of revenue: |  |
Net premiums written | 38,627 |  | 28,795 |
Investment-related (loss) revenue | (13,253 | ) | 7,126 |
Other | 138 |  | 315 |
Total revenues | $ | 29,901 |  | $ | 39,946 |

Note 12 – Leases
The Company enters into lease agreements that are primarily used for office space. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the term of the lease.
A portion of the Company's current leases include an option to extend or cancel the lease term. The exercise of such an option is solely at the Company's discretion. The operating lease liability recorded in the Consolidated Balance Sheets includes lease payments related to options to extend or cancel the lease term if the Company determined at the date of adoption that the lease was expected to be renewed or extended. The Company, in determining the present value of lease payments, utilized the average rate over a 10-year term based upon the Moody's seasoned Aaa corporate bond yields, as explicit rates of interest were not readily determinable in the lease contracts. The Company does not carry debt; thus no incremental borrowing rate was available to the Company.
Lease expense is included in office and technology expenses in the Consolidated Statements of Operations. Information regarding the Company’s operating leases follows:

| Three Months Ended March 31,
(in thousands) | 2020 | 2019
Operating leases | $ | 320 |  | $ | 314 |
Short-term leases (b) | 30 |  | 34 |
Lease expense | $ | 350 |  | $ | 348 |
Sub-lease income | — |  | — |
Lease cost | $ | 350 |  | $ | 348 |

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

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

(in thousands) | As of March 31, 2020 | As of December 31, 2019
Current: |  |
Operating lease liabilities | $ | 1,071 |  | $ | 1,048 |
Non-current: |  |
Operating lease liabilities | 3,266 |  | 3,454 |
Total operating lease liabilities | $ | 4,337 |  | $ | 4,502 |

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The future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of March 31, 2020, are summarized as follows:

Year Ended (in thousands) |
2020 | $ | 940 |
2021 | 1,166 |
2022 | 955 |
2023 | 666 |
2024 | 495 |
Thereafter | 596 |
Total undiscounted payments | $ | 4,818 |
Less: present value adjustment | (481 | )
Operating lease liabilities | $ | 4,337 |

Supplemental lease information is as follows:

| As of March 31, 2020 | As of December 31, 2019
Weighted average remaining lease term (years) | 4.67 |  | 4.84 |
Weighted average discount rate | 4.6 | % | 4.6 | %

The Company does not have any material pending operating or financing lease agreements that become effective in future periods.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The Company's Annual Report on Form 10-K for the year ended December 31, 2019 should be read in conjunction with the following discussion since it contains information which is important for evaluating the Company's operating results and financial condition.
In addition, the Company may make forward-looking statements in the following discussion and analysis. Forward looking statements are based on certain assumptions and expectations of future events that are subject to a number of risks and uncertainties. Actual results may vary. See "Safe Harbor for Forward Looking Statements" at the end of this discussion and analysis, as well as the sections titled "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K and Part II, Item 1A of this Quarterly Report on Form 10-Q for factors that could affect forward-looking statements.
Overview
Investors Title Company (the “Company”) is a holding company that engages primarily in issuing title insurance through two subsidiaries, Investors Title Insurance Company (“ITIC”) and National Investors Title Insurance Company (“NITIC”). Total revenues from the title segment accounted for 97.7% of the Company's revenues for the three-month period ended March 31, 2020. Through ITIC and NITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer.
Title insurance protects against loss or damage resulting from title defects that affect real property. When real property is conveyed from one party to another, occasionally there is an undisclosed defect in the title or a mistake or omission in a prior deed, will or mortgage that may give a third party a legal claim against such property. If a covered claim is made against real property, title insurance provides indemnification against insured defects.
There are two basic types of title insurance policies – one for the mortgage lender and one for the real property owner. A lender often requires the property owner to purchase a lender’s title insurance policy to protect its position as a holder of a mortgage loan, but the lender’s title insurance policy does not protect the property owner. The property owner has to purchase a separate owner’s title insurance policy to protect its investment.
The Company issues title insurance policies through its home and branch offices and through a network of agents. Issuing agents are typically real estate attorneys, independent agents or subsidiaries of community and regional mortgage lending institutions, depending on local customs and regulations and the Company’s marketing strategy in a particular territory. The ability to attract and retain issuing agents is a key determinant of the Company’s growth in title insurance premiums written.
Revenues for the title insurance segment primarily result from purchases of new and existing residential and commercial real estate, refinance activity and certain other types of mortgage lending such as home equity lines of credit.
Title insurance premiums vary from state to state and are subject to extensive regulation. Statutes generally provide that rates must not be excessive, inadequate or unfairly discriminatory. The process of implementing a rate change in most states involves pre-approval by the applicable state insurance regulator.
Volume is a factor in the Company’s profitability due to fixed operating costs that are incurred by the Company regardless of title insurance premium volume. The resulting operating leverage tends to amplify the impact of changes in volume on the Company’s profitability. The Company’s profitability also depends, in part, upon its ability to manage its investment portfolio to maximize investment returns and to minimize risks such as interest rate changes, defaults and impairments of assets.
The Company’s volume of title insurance premiums is affected by the overall level of residential and commercial real estate activity, which includes property sales, mortgage financing and mortgage refinancing. Real estate activity, home sales and mortgage lending are cyclical in nature. Real estate activity is affected by a number of factors, including the availability of mortgage credit, the cost of real estate, consumer confidence, employment and family income levels, and general United States economic conditions. Interest rate volatility is also an important factor in the level of residential and commercial real estate activity.
The Company’s title insurance premiums in future periods are likely to fluctuate due to these and other factors which are beyond management’s control.
Historically, the title insurance business tends to be seasonal as well as cyclical. Because home sales are typically strongest in periods of favorable weather, the first calendar quarter tends to have the lowest activity levels, while the spring and summer quarters tend to be more active. Mortgage refinance activity tends to be influenced less by seasonality and more by economic cycles, with activity levels increasing during times of falling interest rates.
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Services other than title insurance provided by operating divisions of the Company are not reported separately, but rather are reported collectively in a category called “All Other”. These other services include those offered by the Company and by its wholly owned subsidiaries, Investors Title Exchange Corporation (“ITEC”), Investors Title Accommodation Corporation (“ITAC”), Investors Trust Company (“Investors Trust”) and Investors Title Management Services, Inc. (“ITMS”).
The Company’s exchange services division, consisting of the operations of ITEC and ITAC, provides customer services in connection with tax-deferred real property exchanges. ITEC acts as a qualified intermediary in tax-deferred exchanges of property held for productive use in a trade or business or for investment, and its income is derived from fees for handling exchange transactions and interest earned on client deposits held by the Company. In its role as qualified intermediary, ITEC coordinates the exchange aspects of the real estate transaction, and its duties include drafting standard exchange documents, holding the exchange funds between the time the old property is sold and the new property is purchased, and accepting the formal identification of the replacement property within the required identification period. ITAC provides services as an exchange accommodation titleholder for accomplishing “parking transactions” as set forth in the safe harbor contained in Internal Revenue Procedure 2000-37. These transactions include reverse exchanges when taxpayers decide to acquire replacement property before selling the relinquished property, or “build to suit” exchanges, when improvements must be made to the replacement property before the taxpayer acquires the improved replacement property. The services provided by the Company’s exchange services division, ITEC and ITAC, are pursuant to provisions in the Internal Revenue Code. From time to time, these laws are subject to review and changes, which may negatively affect the demand for tax-deferred exchanges in general, and consequently, the revenues and profitability of the Company’s exchange services division.
The Company’s trust services division, Investors Trust, provides investment management and trust services to individuals, companies, banks and trusts.
ITMS offers various consulting and management services to provide clients with the technical expertise to start and successfully operate a title insurance agency.
Business Trends and Recent Conditions; COVID-19 Pandemic
The housing market is heavily influenced by government policies and overall economic conditions. Regulatory reform and initiatives by various governmental agencies, including the Federal Reserve's monetary policy and other regulatory changes, could impact lending standards or the processes and procedures used by the Company. The current real estate environment, including interest rates and general economic activity, typically influence the demand for real estate. Changes in either of these areas would likely impact the Company's results of operations.
An outbreak of a coronavirus ("COVID-19" or "the virus") has emerged and in March 2020 the World Health Organization declared it a pandemic. This contagious disease outbreak has continued to spread across the globe and is impacting worldwide economic activity and financial markets. The pandemic has had a negative impact on the real estate market and the value of marketable securities, including those held by the Company. In response, the U.S. government and its agencies have taken a number of significant measures to provide monetary stimulus. Such actions include an unscheduled cut to the federal funds rate, the introduction of new programs to preserve market liquidity, extended unemployment and sick leave benefits, low-interest loans for working capital access and payroll assistance, and other relief measures for both workers and businesses. The Company is fully operational and has not had any reductions in workforce. A large portion of the Company's workforce is performing their job functions remotely. The Company has not taken stimulus relief funding or added any other forms of debt.
The primary impact of the COVID-19 pandemic on the Company’s first quarter results was a reduction in value of the investment portfolio. The Company did experience a slowdown in purchase activity towards the end of the first quarter and continuing on into the beginning of the second quarter, as the pandemic worsened and states and municipalities in which the Company conducts business implemented “stay at home” orders. The impact of the slowing purchase activity has been somewhat offset by lower average mortgage interest rates leading to an increase in the volume of refinance activity, although it is unclear if refinance activity will remain elevated in future periods. It is possible that net premiums written will decline in the second quarter, versus both the prior year period and the first quarter of 2020, due to the pandemic and the economic disruption it is causing. Because of the inherent uncertainty regarding the duration and severity of the COVID-19 pandemic and its effects on the economy, as well as uncertainty regarding the effects of government measures to combat the spread of the virus, the Company is currently unable to predict what the ultimate impact of the pandemic on its business will be, or when real estate activity may return to normal.
The Company has implemented a number of measures to protect the health of its employees, to provide for the continuity of its business and to take prudent cost-saving actions during this unpredictable time of crisis, including moving its workforce to telecommuting and restricting business travel. To help get mortgage transactions closed during the pandemic, temporary guidelines have been issued by several entities allowing certain technologies to be used to facilitate what would otherwise be traditional, in-person paper-based closings. Entities involved in the real estate industry, including the Company, are expected to continue to evaluate the evolving COVID-19 situation and may take additional measures to adapt as the situation developments.
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Regulatory Environment
The Federal Open Market Committee (“FOMC”) of the Federal Reserve issues disclosures on a periodic basis that include projections of the federal funds rate and expected actions. At the December 2015 meeting, the FOMC voted to raise the federal funds rate for the first time since December 2008 to a target range between 0.25% and 0.50%. Since December 2015, the FOMC has voted on several occasions to increase the federal funds rate, most recently at the December 2018 meeting to a target range between 2.25% and 2.50%. However, due to developments impacting the economic outlook, as well as muted inflation pressures, at the July 2019 meeting, the FOMC reversed course and decided to lower the target range for the federal funds rate to between 2.00% and 2.25%. The FOMC has elected to lower rates at subsequent meetings. In normal economic situations, future adjustments to the rate are expected to be based on realized and expected economic developments to achieve maximum employment and inflation near the FOMC's symmetric 2.0% objective. However, in response to risk posed to economic activity by COVID-19, on March 15, 2020 the FOMC lowered the target range between 0.00% and 0.25%.
In 2008, the federal government took control of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) in an effort to keep these government-sponsored entities from failing. The primary functions of Fannie Mae and Freddie Mac are to provide liquidity to the nation's mortgage finance system by purchasing mortgages on the secondary market, pooling them and selling them as mortgage-backed securities. In order to securitize, Fannie Mae and Freddie Mac typically require the purchase of title insurance for loans they acquire. Since the federal takeover, there have been various discussions and proposals regarding their reform. Changes to these entities could impact the entire mortgage loan process and, as a result, could affect the demand for title insurance. The timing and results of reform are currently unknown; however, any changes to these entities could affect the Company and its results of operations.
In recent years, the Consumer Financial Protection Bureau (“CFPB”), Office of the Comptroller of Currency and the Federal Reserve have issued memorandums to banks that communicated those agencies’ heightened focus on vetting third-party providers. Such increased regulatory involvement may affect the Company's agents and approved providers. Further proposals to change regulations governing insurance holding companies and the title insurance industry are often introduced in Congress, in state legislatures and before various insurance regulatory agencies. Although the Company regularly monitors such proposals, the likelihood and timing of passage of any such regulation, and the possible effects of any such regulation on the Company and its subsidiaries, cannot be determined at this time.
In recent periods, both the President and certain members of Congress have indicated a desire for reform of the CFPB. The timing and nature of any reforms are currently unknown; however, any changes to the CFPB could affect the Company and its results of operations.
Real Estate Environment
The Mortgage Bankers Association's ("MBA") April 2, 2020 Mortgage Finance Forecast (“MBA Forecast”), which includes COVID-19 considerations, projects 2020 purchase activity to decrease 2.4% to $1,242 billion and mortgage refinance activity to increase 31.4% to $1,184 billion, resulting in a net increase in total mortgage originations of 11.6% to $2,426 billion, all from 2019 levels. In 2019, purchase activity accounted for 58.5% of all mortgage originations and is projected in the MBA Forecast to represent 51.2% of all mortgage originations in 2020. Due to the rapidly changing environment brought on by COVID-19, these projections and the impact of actual future developments on the Company could be subject to material change.
According to data published by Freddie Mac, the average 30-year fixed mortgage interest rates in the United States were 3.5% and 4.4% for the three-month periods ended March 31, 2020 and 2019, respectively. Per the MBA Forecast, mortgage interest rates are projected to be 3.5% in the fourth quarter of 2020, and then will gradually increase to 3.8% by 2022.
Historically, activity in real estate markets has varied over the course of market cycles by geographic region and in response to evolving economic factors. Operating results can vary from year to year based on cyclical market conditions and do not necessarily indicate the Company's future operating results and cash flows.
Critical Accounting Estimates and Policies
The preparation of the Company's Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures regarding contingencies and commitments. Actual results could differ from these estimates. During the three-month period ended March 31, 2020, the Company made the following changes to its critical accounting policies as previously disclosed in Management's Discussion and Analysis in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission.
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The Company has updated the following accounting policies due to the adoption of Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326):
Allowance for Credit Losses – Available-for-Sale Securities
For available-for-sale fixed maturity securities in an unrealized loss position, the Company evaluates the securities to determine whether the decline in the estimated fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses (“ACL”) on the Consolidated Balance Sheets, limited to the amount by which the amortized cost basis exceeds the estimated fair value, with a corresponding adjustment to the Consolidated Statements of Operations. Both the ACL and the adjustment to net income may be reversed if conditions change. However, if the Company intends to sell an impaired available-for-sale fixed maturity security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount must be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to estimated fair value, there is no ACL in this situation.
In evaluating available-for-sale fixed maturity securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which estimated fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition, among other factors.
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the ACL when management believes the uncollectability of an available-for-sale fixed maturity security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Accrued interest receivable is excluded from the estimate of credit losses.
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Results of Operations
The following table presents certain Consolidated Statements of Operations data for the three-month periods ended March 31, 2020 and 2019:

|  | Three Months Ended March 31,
(in thousands) |  | 2020 |  | 2019
Revenues: |  |  |  |
Net premiums written |  | $ | 38,627 |  |  | $ | 28,795 |
Escrow and other title-related fees |  | 1,842 |  |  | 1,322 |
Non-title services |  | 2,547 |  |  | 2,388 |
Interest and dividends |  | 1,177 |  |  | 1,256 |
Other investment income |  | 440 |  |  | 410 |
Net realized investment (losses) gains |  | (412 | ) |  | 790 |
Changes in the estimated fair value of equity security investments |  | (14,458 | ) |  | 4,670 |
Other |  | 138 |  |  | 315 |
Total Revenues |  | 29,901 |  |  | 39,946 |
Operating Expenses: |  |  |  |
Commissions to agents |  | 20,187 |  |  | 15,058 |
Provision for claims |  | 906 |  |  | 226 |
Personnel expenses |  | 11,809 |  |  | 11,612 |
Office and technology expenses |  | 2,415 |  |  | 2,223 |
Other expenses |  | 3,113 |  |  | 2,514 |
Total Operating Expenses |  | 38,430 |  |  | 31,633 |
(Loss) Income before Income Taxes |  | (8,529 | ) |  | 8,313 |
(Benefit) Provision for Income Taxes |  | (1,518 | ) |  | 1,687 |
Net (Loss) Income |  | $ | (7,011 | ) |  | $ | 6,626 |

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Insurance Revenues
Insurance revenues include net premiums written and escrow and other title-related income that includes escrow fees, commissions and settlement fees. Non-title services revenue, investment-related revenues and other revenues are discussed separately below.
Net Premiums Written
Net premiums written increased 34.1% for the three-month period ended March 31, 2020 to $38.6 million, compared with $28.8 million for the same prior year period. The increase for the three-months ended March 31, 2020 was primarily driven by strong purchase volume throughout most of the quarter and lower average mortgage interest rates leading to an increase in the volume of refinance activity.
Title insurance companies typically issue title insurance policies directly through home and branch offices or through title agencies. Following is a breakdown of premiums generated by branch and agency operations for the three-month periods ended March 31, 2020 and 2019:

|  | Three Months Ended March 31,
(in thousands, except percentages) |  | 2020 |  | % |  | 2019 |  | %
Home and Branch |  | $ | 9,895 |  |  | 25.6 |  | $ | 7,166 |  |  | 24.9
Agency |  | 28,732 |  |  | 74.4 |  | 21,629 |  |  | 75.1
Total |  | $ | 38,627 |  |  | 100.0 |  | $ | 28,795 |  |  | 100.0

Home and Branch Office Net Premiums – In the Company's home and branch operations, the Company issues a title insurance policy and retains the entire premium, as no commissions are paid in connection with these policies. Net premiums written from home and branch operations increased 38.1% for the three-month period ended March 31, 2020, compared with the same prior year period. The increase for the three-month period ended March 31, 2020 was primarily attributable to strong purchase volume throughout most of the quarter and lower average mortgage interest rates driving an increase in the volume of refinance transactions.
All of the Company's home office operations and the majority of branch offices are located in North Carolina; as a result, the home and branch office net premiums written are primarily for North Carolina title insurance policies.
Agency Net Premiums – When a policy is written through a title agency, the premium is shared between the agency and the underwriter. Total premiums include an estimate of premiums for policies that have been issued by agents, but not reported to the Company as of the balance sheet date. To determine the estimated premiums, the Company uses historical experience, as well as other factors, to make certain assumptions about the average elapsed time between the policy effective date and the date the policies are reported. From time to time, the Company adjusts the inputs to the estimation process as agents report transactions and new information becomes available. In addition to estimating revenues, the Company also estimates and accrues agent commissions, claims provision, premium taxes, income taxes, and other expenses associated with the estimated revenues that have been accrued. The Company reflects any adjustments to the accruals in the results of operations in the period in which new information becomes available.
Agency net premiums written increased 32.8% for the three-month period ended March 31, 2020, compared with the same prior year period. The increase for the three-month period ended March 31, 2020 was primarily attributable to strong purchase volume throughout most of the quarter and a higher volume of refinance activity due to lower average mortgage interest rates.
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Following is a schedule of net premiums written for the three-month periods ended March 31, 2020 and 2019 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently underwrite title insurance:

|  | Three Months Ended March 31,
State (in thousands) |  | 2020 |  | 2019
North Carolina |  | $ | 13,943 |  |  | $ | 10,205 |
Texas |  | 7,517 |  |  | 6,115 |
Georgia |  | 4,505 |  |  | 3,199 |
South Carolina |  | 3,481 |  |  | 3,271 |
Virginia |  | 1,652 |  |  | 1,178 |
All Others |  | 7,649 |  |  | 4,982 |
Premiums Written |  | 38,747 |  |  | 28,950 |
Reinsurance Assumed |  | 3 |  |  | — |
Reinsurance Ceded |  | (123 | ) |  | (155 | )
Net Premiums Written |  | $ | 38,627 |  |  | $ | 28,795 |

Escrow and Other Title-Related Fees
Escrow and other title-related fees consists primarily of commission income, escrow and other various fees associated with the issuance of a title insurance policy including settlement, examination and closing fees. Escrow and other title-related fee revenues were $1.8 million for the three-month period ended March 31, 2020, compared with $1.3 million for the same prior year period. The increase in 2020 primarily related to increased fee and commission income.
Revenue from Non-Title Services
Revenue from non-title services includes trust services, agency management services and exchange services income. Non-title service revenues were $2.5 million for the three-month period ended March 31, 2020, compared with $2.4 million for the same prior year period. The increase in 2020 related to increased revenue from all major components of non-title services, particularly exchange and agency management services revenue.
Investment-Related Revenues
Investment-related revenues include interest and dividends, other investment income, net realized investment (losses) gains and changes in the estimated fair value of equity security investments.
Interest and Dividends
The Company derives a substantial portion of its income from investments in fixed maturity securities, which are primarily municipal and corporate fixed maturity securities, and equity securities. The Company’s investment policy is designed to comply with regulatory requirements and to balance the competing objectives of asset quality and investment returns. The Company's title insurance subsidiaries are required by statute to maintain minimum levels of investments in order to protect the interests of policyholders.
The Company’s investment strategy emphasizes after-tax income and principal preservation. The Company’s investments are primarily in fixed maturity securities and, to a lesser extent, equity securities. The average effective maturity of the majority of the fixed maturity securities is less than 10 years. The Company’s invested assets are managed to fund its obligations and evaluated to ensure long term stability of capital accounts.
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As the Company generates cash from operations, it is invested in accordance with the Company’s investment policy and corporate goals. The Company’s investment policy has been designed to balance multiple goals, including the assurance of a stable source of income from interest and dividends, the preservation of principal, and the provision of liquidity sufficient to meet insurance underwriting and other obligations as they become payable in the future. Securities purchased may include a combination of taxable or tax-exempt fixed maturity securities and equity securities. The Company also invests in short-term investments that include money market funds and certificates of deposit. The Company strives to maintain a high quality investment portfolio. Interest and investment income levels are primarily a function of general market performance, interest rates and the amount of cash available for investment.
Interest and dividends were $1.2 million for the three-month period ended March 31, 2020, compared with $1.3 million for the same prior year period. The decrease in 2020 was primarily related to less interest earned due to a lower portfolio balance of fixed maturity securities and lower interest rates.
Other Investment Income
Other investment income consists primarily of income related to investments in unconsolidated affiliates, typically structured as limited liability companies ("LLC's"), accounted for under either the equity method of accounting or the measurement alternative for investments that do not have readily determinable fair values. The measurement alternative method requires investments without readily determinable fair values to be recorded at cost, less impairments, and plus or minus any changes resulting from observable price changes. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments.
Other investment income was $440 thousand for the three-month period ended March 31, 2020, compared with $410 thousand for the same prior year period. Changes in other investment income are impacted by fluctuations in the carrying value of the underlying investment and or distributions received.
Net Realized Investment (Losses) Gains
Dispositions of equity securities at a realized gain or loss reflect such factors as industry sector allocation decisions, ongoing assessments of issuers’ business prospects and tax planning considerations. Additionally, the amounts of net realized investment (losses) gains are affected by assessments of securities’ valuation for other-than-temporary impairment. As a result of the interaction of these factors and considerations, the net realized investment gain or loss can vary significantly from period to period.
The net realized investment (losses) gains were $(412) thousand for the three-month period ended March 31, 2020, compared with $790 thousand for the same prior year period. The net realized investment (losses) gains for the three-month period ended March 31, 2020 included impairment charges of $482 thousand of certain fixed maturity securities the Company determined were other-than-temporarily impaired. There were no impairment charges recorded in 2019. Management believes unrealized losses on remaining fixed maturity securities at March 31, 2020 are temporary in nature.
The securities in the Company’s investment portfolio are subject to economic conditions and market risks. The Company considers relevant facts and circumstances in evaluating whether a credit or interest-related impairment of a fixed maturity security is other-than-temporary. Relevant facts and circumstances include the extent and length of time the fair value of an investment has been below cost.
There are a number of risks and uncertainties inherent in the process of monitoring impairments and determining if an impairment is other-than-temporary. These risks and uncertainties include the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated; the risk that the Company’s assessment of an issuer’s ability to meet all of its contractual obligations will change based on changes in the characteristics of that issuer; the risk that information obtained by the Company or changes in other facts and circumstances leads management to change its intent to sell the fixed maturity security; and the risk that management is making decisions based on misstated information in the financial statements provided by issuers.
Changes in the Estimated Fair Value of Equity Security Investments
Changes in the estimated fair value of equity security investments were $(14.5) million for the three-month period ended March 31, 2020, compared with $4.7 million for the same prior year period. Such fluctuations are the result of changes in general market conditions during the respective periods. In the first quarter of 2020, all major U.S. stock market indices substantially declined due to economic slowdowns and uncertainty resulting from COVID-19.
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Other Revenues
Other revenues primarily include state tax credit income, gains and losses on the disposal of fixed assets and miscellaneous revenues. Other revenues were $138 thousand for the three-month period ended March 31, 2020, compared with $315 thousand for the same prior year period. The decrease in 2020 primarily related to a decline in state tax credit income.
Expenses
The Company's operating expenses consist primarily of commissions to agents, personnel expenses, office and technology expenses and the provision for claims. Operating expenses increased 21.5% for the three-month period ended March 31, 2020, compared with the same prior year period. The increase for the three-month period ended March 31, 2020 was primarily due to increases in commissions to agents, the provision for claims and other expenses.
Following is a summary of the Company's operating expenses for the three-month periods ended March 31, 2020 and 2019. Inter-segment eliminations have been netted; therefore, the individual segment amounts will not agree to Note 4 in the accompanying Consolidated Financial Statements.

|  | Three Months Ended March 31,
(in thousands, except percentages) |  | 2020 |  | % |  | 2019 |  | %
Title Insurance |  | $ | 36,118 |  |  | 94.0 |  | $ | 29,427 |  |  | 93.0
All Other |  | 2,312 |  |  | 6.0 |  | 2,206 |  |  | 7.0
Total |  | $ | 38,430 |  |  | 100.0 |  | $ | 31,633 |  |  | 100.0

On a combined basis, the after-tax profit margin was (23.4)% for the three-month period ended March 31, 2020, compared with 16.6% for the same prior year period. The Company continually strives to enhance its competitive strengths and market position, including ongoing initiatives to manage its operating expenses.
Total Company
Personnel Expenses – Personnel expenses include base salaries, benefits and payroll taxes, bonuses paid to employees and contract labor expenses. Personnel expenses were $11.8 million for the three-month period ended March 31, 2020, compared with $11.6 million for the same prior year period. On a consolidated basis, personnel expenses as a percentage of total revenues was 39.5% for the three-month period ended March 31, 2020, compared with 29.1% for the same prior year period. The increase in personnel expenses for the three-month period ended March 31, 2020 was primarily related to normal inflationary increases in salaries and benefits, growth in staffing levels associated with higher activity levels and targeted investments in key areas of our business, and continued support of multi-year technology initiatives. The increase in expense as a percentage of total revenues related to the significant decrease in revenues due to the changes in the estimated fair value of equity security investments.
Office and Technology Expenses – Office and technology expenses primarily include facilities expenses, software and hardware expenses, depreciation expense, telecommunications expenses, and business insurance. Office and technology expenses were $2.4 million for the three-month period ended March 31, 2020, compared with $2.2 million for the same prior year period. The increase in 2020 was primarily related to ongoing investments in software and technology related initiatives.
Other Expenses – Other expenses primarily include business development expenses, premium-related taxes and licensing, professional services, title and service fees, amortization of intangible assets and other general expenses. Other expenses were $3.1 million for the three-month period ended March 31, 2020, compared with $2.5 million for the same prior year period. The increase in 2020 was primarily related to increases in premium-related taxes and licensing, title and service fees and professional services.
Title Insurance
Commissions to Agents – Agent commissions represent the portion of premiums retained by agents pursuant to the terms of their respective agency contracts. Commissions to agents increased 34.1% for the three-month period ended March 31, 2020, compared with the same prior year period. Commission expense as a percentage of net premiums written by agents was 70.3% for the three-month period ended March 31, 2020, compared with 69.6% for the same prior year period. The change in commission expense, and commission expense as a percentage of net premiums written, was primarily related to increased premiums written by agents and changes in geographic mix for the three-month period ended March 31, 2020. Commission rates vary by market due to local practice, competition and state regulations.
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Provision for Claims – The provision for claims as a percentage of net premiums written was 2.3% for the three-month period ended March 31, 2020, compared with 0.8% for the same prior year period. The increase in the provision for claims for the three-month period ended March 31, 2020, compared with the same prior year period, primarily related to the increase in premium volume and less favorable loss development in the current period.
Title claims are typically reported and paid within the first several years of policy issuance. The provision for claims reflects actual payments of claims, net of recovery amounts, plus adjustments to the specific and incurred but not reported claims reserves, the latter of which are actuarially determined based on historical claims experience. Actual payments of claims, net of recoveries, were $832 thousand and $571 thousand for the three-month periods ended March 31, 2020 and 2019, respectively.
At March 31, 2020, the total reserve for claims was $31.4 million. Of that total, approximately $3.6 million was reserved for specific claims, and approximately $27.8 million was reserved for claims for which the Company had no notice. Because of the uncertainty of future claims, changes in economic conditions and the fact that claims may not materialize for several years, reserve estimates are subject to variability.
Changes from prior periods in the expected liability for claims reflect the uncertainty of the claims environment, as well as the limited predictive power of historical data. The Company continually updates and refines its reserve estimates as current experience develops and credible data emerges. Such data includes payments on claims closed during the quarter, new details that emerge on open cases that cause claims adjusters to increase or decrease the case reserves, and the impact that these types of changes have on the Company’s total loss provision. Adjustments may be required as new information develops, which often varies from past experience.
Income Taxes
The (benefit) provision for income taxes was $(1.5) million for the three-month period ended March 31, 2020, compared with $1.7 million for the same prior year period. Income tax benefit, including federal and state taxes, as a percentage of loss before income taxes was 17.8% for the three-month period ended March 31, 2020, compared with income tax expense as a percentage of income before income taxes of 20.3% for the same prior year period. The effective income tax rates for both 2020 and 2019 differ from the U.S. federal statutory income tax rate of 21% primarily due to the effect of tax-exempt income. Tax-exempt income lowers the effective tax rate.
The Company believes it is more likely than not that the tax benefits associated with recognized impairments and unrecognized losses recorded through March 31, 2020 will be realized. However, this judgment could be impacted by further market fluctuations.
Liquidity and Capital Resources
The Company’s current cash requirements primarily include general operating expenses (including the payment of title claims), income taxes, capital expenditures and dividends on its common stock. Cash flows from operations have historically been the primary source of financing for expanding operations, whether through organic growth or outside investments.
The Company evaluates nonorganic growth opportunities, such as mergers and acquisitions, from time to time in the ordinary course of business. Because of the episodic nature of these events, related incremental liquidity and capital resource needs can be difficult to predict.
The Company’s operating results and cash flows are heavily dependent on the real estate market. The Company’s business has certain fixed costs such as personnel; therefore, changes in the real estate market are monitored closely, and operating expenses such as staffing levels are managed and adjusted accordingly. The Company believes that its significant working capital position and management of operating expenses will aid its ability to manage cash resources through fluctuations in the real estate market.
The extent to which COVID-19 impacts the Company's future operations will depend on future developments which cannot be predicted with certainty at this time; including the duration and severity of the pandemic, actions taken to contain the spread of the virus, and regulatory actions taken as a result of the outbreak. Currently, the Company is fully operational and has not had any reductions in workforce. A large portion of the Company's workforce is performing their job functions remotely. The Company has not taken stimulus relief funding or added any other forms of debt.
Cash Flows – Net cash flows provided by (used in) operating activities were $2.0 million and $(847) thousand for the three-month periods ended March 31, 2020 and 2019, respectively. Cash flows provided by operating activities increased in 2020 from 2019, primarily due to net income increasing when adjusted for non-cash items, such as changes in the estimated fair value of equity security investments, and the timing of payable disbursements. This was partially offset by changes in other assets and deferred income taxes.
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Cash flows from non-operating activities have historically consisted of purchases and proceeds from investing activities and the payment of dividends. Net cash was used in investing activities in 2020, compared with net cash being provided by investing activities in the prior year period, due to purchase activity of investments outpacing proceeds received from investments.
The Company maintains a high degree of liquidity within its investment portfolio in the form of cash, short-term investments and other readily marketable securities. As of March 31, 2020, the Company held cash and cash equivalents of $25.3 million, short-term investments of $15.6 million, available-for-sale fixed maturity securities of $101.4 million and equity securities of $48.0 million. The net effect of all activities on total cash and cash equivalents was a decrease of $625 thousand in 2020.
Capital Resources – The amount of capital resources the Company maintains is influenced by state regulation, the need to maintain superior financial ratings from third-party rating agencies and other marketing and operational considerations.
The Company's significant sources of funds are dividends and distributions from its subsidiaries, primarily its two title insurance subsidiaries. Cash is received from its subsidiaries in the form of dividends and as reimbursements for operating and other administrative expenses that it incurs. The reimbursements are executed within the guidelines of management agreements between the Company and its subsidiaries.
The ability of the Company's title insurance subsidiaries to pay dividends to the Company is subject to state regulation from their respective states of domicile. Each state regulates the extent to which title underwriters can pay dividends or make distributions and requires prior regulatory approval of the payment of dividends and other intercompany transfers. The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends. Depending on regulatory conditions, the Company may in the future need to retain cash in its title insurance subsidiaries in order to maintain their statutory capital position. As of March 31, 2020, both ITIC and NITIC met the minimum capital, surplus and reserve requirements for each state in which they are licensed.
While state regulations and the need to cover risks may set a minimum level for capital requirements, other factors necessitate maintaining capital resources in excess of the required minimum amounts. For instance, the Company’s capital resources help it maintain high ratings from insurance company rating agencies. Superior ratings strengthen the Company's ability to compete with larger, well known title insurers with national footprints.
A strong financial position provides the necessary flexibility to fund potential acquisition activity, to invest in the Company's core business, and to minimize the financial impact of potential adverse developments. Adverse developments that generally require additional capital include adverse financial results, changes in statutory accounting requirements by regulators, reserve charges, investment losses or costs incurred to adapt to a changing regulatory environment, including costs related to CFPB regulation of the real estate industry.
The Company bases its capitalization levels, in part, on net coverage retained. Since the Company’s geographical focus has been and continues to be concentrated in states with average premium rates typically lower than the national average, capitalization relative to premiums will usually appear higher than industry averages.
Due to the Company’s historical ability to consistently generate positive cash flows from its consolidated operations and investment income, management believes that funds generated from operations will enable the Company to adequately meet its current operating needs for the foreseeable future. However, especially with the onset of COVID-19, there can be no assurance that future experience will be similar to historical experience, since it is influenced by such factors as the interest rate environment, real estate activity, the Company’s claims-paying ability and its financial strength ratings. In addition to operational and investment considerations, taking advantage of opportunistic external growth opportunities may necessitate obtaining additional capital resources. The Company is carefully monitoring the COVID-19 situation and any other trends that are likely to result in material adverse liquidity changes, and will continually assess its capital allocation strategy, including decisions relating to payment of dividends, repurchasing the Company’s stock and/or conserving cash.
Purchase of Company Stock – On November 9, 2015, the Board of Directors of the Company approved the purchase of an additional 163,335 shares pursuant to the Company’s repurchase plan, such that there was authority remaining under the plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the plan immediately after this approval. Unless terminated earlier by resolution of the Board of Directors, the plan will expire when all shares authorized for purchase under the plan have been purchased. Pursuant to the Company’s ongoing purchase program, the Company purchased 0 and 66 shares for the three-month periods ended March 31, 2020 and 2019, respectively. The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market price of the Company’s common stock, the Company’s available cash and then existing alternative uses for such cash.
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Capital Expenditures – Capital expenditures were approximately $643 thousand for the three-month period ended March 31, 2020. In 2020, the Company has plans for various capital improvement projects, including increased investment in a number of technology and system development initiatives and hardware purchases which are anticipated to be funded via cash flows from operations. All material anticipated capital expenditures are subject to periodic review and revision and may vary depending on a number of factors.
Off-Balance Sheet Arrangements
As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest money received under real estate contracts, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated Balance Sheets. However, the Company remains contingently liable for the disposition of these deposits.
In addition, in administering tax-deferred property 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, through limited liability companies that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property held by the Company for the purpose of completing such transactions totaled approximately $223.6 million and $214.6 million as of March 31, 2020 and December 31, 2019, respectively. These exchange deposits are held at third-party financial institutions. Exchange deposits are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate. Exchange services revenue includes earnings on these deposits; therefore, investment income is shown as non-title services rather than investment income. These like-kind exchange funds are primarily invested in money market and other short-term investments.
External assets under management of Investors Trust Company are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated Balance Sheets.
It is not the general practice of the Company to enter into off-balance sheet arrangements or issue guarantees to third parties. The Company does not have any material source of liquidity or financing that involves off-balance sheet arrangements. Other than items noted above, off-balance sheet arrangements are generally limited to the future payments due under various agreements with third-party service providers.
Recent Accounting Standards
For a description of recent accounting pronouncements, please refer to Note 1 in Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
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Safe Harbor for Forward-Looking Statements
This Quarterly Report on Form 10-Q, as well as information included in future filings by the Company with the Securities and Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the Company, contains, or may contain, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that reflect management’s current outlook for future periods. These statements may be identified by the use of words such as “plan,” “expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “should,” “could,” “would” and other expressions that indicate future events and trends. All statements that address expectations or projections about the future, including statements about the Company’s strategy for growth, product and service development, market share position, claims, expenditures, financial results and cash requirements, are forward-looking statements. Without limitation, projected developments in mortgage interest rates and the overall economic environment set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Trends and Recent Conditions” constitute forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events that are subject to a number of risks and uncertainties.
Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, but not limited to, the following:

• | the impact of the coronavirus, or other pandemics;

• | changes in interest rates and real estate values;

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

• | potential reform of government sponsored entities;

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

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

• | the incidence of fraud-related losses;

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

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

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

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

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

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

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

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

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

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

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

• | difficulty managing growth, whether organic or through acquisitions;

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

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

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

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

These and other risks and uncertainties may be described from time to time in the Company's other reports and filings with the Securities and Exchange Commission. For more details on factors that could affect expectations, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, including under the heading "Risk Factors", as well as the additional risk factor set forth in Part II, Item 1A of this Quarterly Report. The Company is not under any obligation (and expressly disclaims any such obligation) and does not undertake to update or alter any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. You should consider the possibility that actual results may differ materially from our forward-looking statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
For the quarter ended March 31, 2020, there were no material changes in the Company’s market risks as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.
No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. The Company’s disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.
Pursuant to Rule 13a-15(b) under the Exchange Act, an evaluation was performed under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2020 to provide reasonable assurance that the objectives of disclosure controls and procedures are met.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2020, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See discussion of legal proceedings in Note 7 to the Consolidated Financial Statements included in Part I, Item 1 of this Report, which is incorporated by reference into this Part II, Item 1.
Item 1A. Risk Factors
The following updates the risk factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The COVID-19 pandemic has impacted the Company's business, and the duration and extent to which this will impact our future results of operations and financial condition remains uncertain.
An outbreak of a coronavirus ("COVID-19" or "the virus") has emerged and in March 2020, the World Health Organization declared it a pandemic. This contagious disease has spread across the globe and created significant uncertainties by negatively impacting worldwide economic activity and financial markets. The extent to which COVID-19 impacts the Company's future operations will depend on uncertain developments; including the duration and severity of the pandemic, actions taken to contain the spread of the virus, and regulatory actions taken as a result of the outbreak. COVID-19 could impact the availability of key Company personnel and cause disruptions to the real estate environment, financial markets or the Company's information technology systems. In addition, this situation is continually changing, and additional impacts may arise that the Company is not aware of currently. This pandemic has already had a negative impact on the value of marketable securities, including those held by the Company, and could continue to do so in future periods. It has also impacted the real estate market and is expected to impair the process for showing homes, purchasing and closing on the sale of homes for the foreseeable future. It is not currently possible to predict the extent that COVID-19 will impact the Company's financial position or results of operation, although it is possible that it could have a material adverse effect on the Company's business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) | None

(b) | None

(c) | The following table provides information about purchases by the Company (and all affiliated purchasers), during the quarter ended March 31, 2020, of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:

| Issuer Purchases of Equity Securities (unrounded) |  |
Period | Total Number of Shares Purchased |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plan |  | Maximum Number of Shares that May Yet Be Purchased Under the Plan
Beginning of period |  |  |  |  |  |  | 428,186 |
January 2020 | — |  |  | $ | — |  |  | — |  |  | 428,186 |
February 2020 | — |  |  | — |  |  | — |  |  | 428,186 |
March 2020 | — |  |  | — |  |  | — |  |  | 428,186 |
Total | — |  |  | $ | — |  |  | — |  |  | 428,186 |

For the quarter ended March 31, 2020, the Company purchased no shares of the Company’s common stock pursuant to the Company’s ongoing purchase program that was initially announced on June 5, 2000. On November 9, 2015, the Board of Directors of the Company approved the purchase of an additional 163,335 shares pursuant to the Company’s repurchase plan, such that there was authority remaining under the plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the plan immediately after this approval. Unless terminated earlier by resolution of the Board of Directors, the plan will expire when all shares authorized for purchase under the plan (as such number may be amended by the Board) have been purchased. The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market price of the Company’s common stock, the Company’s available cash and then existing alternative uses for such cash.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits

31(i) | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(ii) | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS | XBRL Instance Document
101.SCH | XBRL Taxonomy Extension Schema Document
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB | XBRL Taxonomy Extension Label Linkbase Document
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document

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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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

Dated: May 8, 2020
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