Copyright 2015 October 2015

Transcription

1 Investrs Title Cmpany Cmprehensive Analysis Cpyright 2015 Octber 2015

2 Legal Disclaimer This presentatin is fr general infrmatinal purpses nly. The views expressed herein represent the pinins f GrizzlyRck Capital, LLC and Grveland Capital, LLC and their affiliates, whse analysis is based n publicly available infrmatin and have been develped independently f Investrs Title Insurance Cmpany (the "Cmpany") and f ther third parties. N representatin r warranty, express r implied, is made as t the accuracy r cmpleteness f any infrmatin cntained in this presentatin. GrizzlyRck Capital, LLC and Grveland Capital, LLC and their affiliates have nt assumed any respnsibility fr independently verifying the infrmatin in this presentatin, and they disclaim any bligatin t update the infrmatin cntained herein and reserve the right t mdify r change their cnclusins at any time in the future. This presentatin is slely fr infrmatinal purpses. This presentatin is nt intended t prvide the sle basis fr any decisin n any transactin and is nt a recmmendatin with respect t any transactin. The recipient shuld make its wn independent business decisin based n all ther infrmatin, advice and the recipient's wn judgment. This presentatin des nt recmmend the purchase r sale f any security nr is it an ffer t sell r a slicitatin f an ffer t buy any security. Furthermre, this presentatin is nt and shuld nt be cnsidered a slicitatin f prxies in cnnectin with any present r future prxy slicitatin. GrizzlyRck Capital, LLC and Grveland Capital, LLC and their affiliates represent a grup f investrs that as f the date heref beneficially wns, in the aggregate, apprximately 5.58% f the utstanding shares f cmmn stck f the Cmpany as disclsed in the grup s Schedule 13D filed with the Securities and Exchange Cmmissin n Octber 7, Members f the grup reserve the right t acquire additinal shares f cmmn stck r sell r therwise dispse f any r all f the shares f cmmn stck f the Cmpany beneficially wned by them, in the pen market, in privately negtiated transactins r therwise. The grup may als take any ther actin with respect t the Cmpany r any f its debt r equity securities in any manner permitted by law. Cautinary Statement Regarding Frward-Lking Statements The infrmatin herein cntains frward-lking statements. Specific frward-lking statements can be identified by the fact that they d nt related strictly t histrical r current facts and include, withut limitatin, wrds such as "may," will," "expects," "believer," "anticipates," "plans," "estimates," "prjects," "targets," "frecasts," "seeks," "culd," "shuld" r the negative f such terms r ther variatins n such terms r cmparable terminlgy. Such frward-lking statements, estimates, and prjectins reflect varius assumptins cncerning anticipated results that are inherently subject t significant uncertainties and cntingencies and have been included slely fr illustrative purpses, including thse risks and uncertainties detailed in the cntinuus disclsure and ther filings f the Cmpany, cpies f which are available n the U.S. Securities and Exchange Cmmissin website ( EDGAR ) at Yu shuld nt rely upn frward-lking statements as a predictin f actual results and actual results may vary materially frm what is expressed in r indicated by the frwardlking statements. 1

3 Table f Cntents Investrs Title Overview Excess Capital Valuatin Analysis Appendix Executive Summary A.M. Best Key Stats and Enterprise Value Histrical Perfrmance Cmpany Descriptin Excess Capital Price t Bk Direct vs Independent Agent Financial Metrics Snapsht Asset Base Intrinsic Valuatin Title American / Independence Business Operatin Distributin Optins Cmparable Businesses Industry Analysis 2

4 Executive Summary GrizzlyRck and Grveland believe Investrs Title is dramatically undervalued at recent trading levels f ~$71 per share. Our base case valuatin is ~$115 per share is based upn cash flw and tangible bk value. We believe Investrs Title has excess capital f apprximately $75 millin. We encurage Investrs Title t evaluate strategic ptins that will enhance sharehlder value including: a tender ffer r share buyback prgram; a special dividend; a synergistic merger r acquisitin t facilitate expansin int new markets; a review f the Cmpany s reinsurance prgram t assure that it is cnsistent with a plan t add ecnmic value and manage tail risks; and bard refrm including but nt limited t sharehlder representatin n the bard f directrs. We request the pprtunity t meet with Investrs Title s management team t engage in friendly, cnstructive, and value-enhancing dialgue. 3

5 Cmpany Descriptin Investrs Title Cmpany ( Investrs Title r the Cmpany ) is a Reginal Mrtgage Title Insurance Underwriter based in Chapel Hill, Nrth Carlina. The Cmpany was incrprated in 1973 in Nrth Carlina & has tw perating subsidiaries: Investrs Title Insurance Cmpany ( Investrs ) and Natinal Investrs Title Insurance Cmpany ( Natinal ) and primarily writes mrtgage title insurance in the Eastern US states. J. Allen Fine is the funder and CEO. His tw sns, Jim and Mrris, nw run the business with him. 4

6 Investrs Title Financial Metrics Snapsht Share Price (10/01/15) $71.5 per share TTM Net Incme (6/30/15) $11.1 millin Fully-Diluted Shares 2.0 millin TTM Earnings Per Share (6/30/15) $5.5 per share Market Capitalizatin $143.7 millin TTM Price t Earnings (6/30/15) 12.9x 2014 Cash Flws frm Operatins $9.7 millin Bk Equity (6/30/15) $139.7 millin 2014 Capital Expenditures $2.0 millin Bk Equity Per Share $69.8 per share 2014 Free Cash Flw $7.7 millin Price t Bk Value 1.0x 2014 Free Cash Flw Per Share $3.8 per share TTM Return n Equity 8.0% 2014 Free Cash Flw / Enterprise Value Yield (1) 11% Dividend Yield 0.4% (1) Enterprise value f $69.7 millin as shwn in Valuatin sectin. Surce: GrizzlyRck, Grveland, and CapIQ. 5

7 Investrs Title Business Operatins 90%+ f Cmpany revenue is derived frm underwriting residential title insurance. Premiums have histrically been cncentrated within Nrth Carlina, Suth Carlina, Texas, and Virginia. Insurance plicies are written thrugh direct branch agents r independent agents. In Nrth Carlina, business is predminantly generated thrugh direct agents with ther states using independent agents t drive business. The Cmpany als ffers ancillary services including tax-deferred exchanges f like-kind prperty ( ITEC & ITAC ), investment management services ( Investrs Trust ), and cnsulting services fr perating a title insurance agency ( ITMS ). 6

8 Table f Cntents Investrs Title Overview Excess Capital Valuatin Analysis Appendix Executive Summary A.M. Best Key Stats and Enterprise Value Histrical Perfrmance Cmpany Descriptin Excess Capital Price t Bk Direct vs Independent Agent Financial Metrics Snapsht Asset Base Intrinsic Valuatin Title American / Independence Business Operatin Distributin Optins Cmparable Businesses Industry Analysis 7

9 Des Investrs Title Have Excess Capital? The fllwing slides attempt t ascertain the fllwing: (1) What is a cnservative asset base needed fr Investrs Title t cnduct nging peratins safely at an A.M. Best rating f a at the insurance subsidiaries? (2) Given this asset base, des Investrs Title have excess capital? If s, hw much? (3) Given the excess capital amunt, what is a reasnable amunt fr Investrs Title t use fr strategic ptins? 8

10 A.M. BEST Analysis A.M. Best uses multiple factrs t derive a psitive credit rating Cnservative underwriting leverage (premiums t surplus). Strng balance sheet and ample liquidity. Prfitability, perating perfrmance and expense management. Significant market share and gegraphic diversificatin. The mrtgage title industry has histrically seen leverage underwriting ratis f 3.0x 5.0x with the recent ratis trending twards 3.0x. Nte: sme private title insurers have cmfrtably perated with leverage ratis in excess f 5.0x. (Surce: A.M. Best) 9

11 Year End 2O14 Industry Metrics Premiums t Surplus Premium/Surplus (1) Dec Year Average ( ) AM Best Issuer Rating Investrs Title Crp. 0.9x 0.9x a First American Financial (2) 4.1x 4.3x a- Fidelity Natinal Financial 2.5x 4.5x a Stewart Title Crp 3.3x 4.3x a- (1) Surplus is based ff f Statutry Surplus at the Parent per Capital IQ. (2) First American Average since 2008 As shwn abve, Investrs Title is a highly cnservative underwriter with mre than ample financial cushin t ffset gegraphic cncentratin 10

12 Histrical Industry Premiums t Surplus 7.40x Title Insurance Histrical Premium/Surplus Relatinship (1) 6.40x 5.40x 4.40x 3.40x 2.40x 1.40x 0.40x Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 ITIC FAF FNF STC (1) Surplus is based ff f Statutry Surplus at the Parent per Capital IQ. Investrs Title has averaged a 0.9x surplus leverage rati since Cmparable firms have averaged ver 4.0x ver the same time perid. 11

13 Investrs Title AM Best Analysis AM Best affirmed the a credit rating f the Investrs Title subsidiaries in May 2015 with the fllwing cmments: The ratings reflect ITC Grup's excellent capitalizatin as evidenced by its cnservative underwriting leverage ratis, which are relatively mdest cmpared t the title industry as a whle. ITC Grup's favrable results are partly due t its effrts t carefully manage its expense structure while limiting lsses. Additinally, the grup has taken initiatives t diversify its bk f business by reducing its cncentratin in Nrth Carlina. We believe the Cmpany has been ultra-cnservative with their premium t surplus rati. Investrs Title shuld be able cnservatively underwrite at 2.0x+ leverage and maintain their rating. 12

14 Excess Capital Analysis at a 2 : 1 Premium t Surplus rati Excess Capital Analysis Investments at 6/30/15 $149 millin Surce Per Q Q (inc. equities, bnds and shrt-term investments) Cash at 6/30/15 $20 millin Per Q Q (cash and accrued interest and dividends) + Ttal Assets $168 millin Summatin - Claim Reserve Liability $38 millin Investments Fr Current Claim Reserves - Inv Held fr Regulatry Needs t Cntinue Underwriting New Plicies - Additinal Investments t Ensure 2:1 Relatinship $48 millin Per Page 47 f Cmpany K $7 millin - Investments Required $94 millin LTM 2015 plicies underwritten f $110m requires ~ $55m statuatry surplus t maintain a 2:1 relatinship ($55m - $48m = $7m) Investments required t maintain current run-rate premiums at 2:1 Excess Capital $75 millin = Ttal Assets - Ttal Investments fr Claim Reserves, Regulatry Needs, and the AM Best 'a' Rating Excess Capital Per Share $37 Based n 2.02 millin Fully-Diluted Shares Outstanding 13

15 Excess Capital Analysis at a 3 : 1 Premium t Surplus rati Excess Capital Analysis Surce Investments at 6/30/15 $149 millin Per Q Q (inc. equities, bnds and shrt-term investments) Cash at 6/30/15 $20 millin Per Q Q (cash and accrued interest and dividends) + Ttal Assets $168 millin Summatin - Claim Reserve Liability $38 millin Investments Fr Current Claim Reserves - Equity/Surplus required t maintain 3:1 underwriting rati $37 millin - Investments Required $75 millin LTM 2015 plicies underwritten f $110 millin requires ~$37 millin statuatry surplus t maintain a 3:1 relatinship Investments required t maintain current run-rate premiums at 3:1 Excess Capital $94 millin = Ttal Assets - Ttal Investments fr Claim Reserves, Regulatry Needs. Excess Capital Per Share $47 Based n 2.02 millin Fully-Diluted Shares Outstanding 14

16 Organizatinal Chart Values in $ millins. Based n 2O14 yearly data Investrs Title Crpratin NASDAQ:ITIC ( HldC ) HldC Cash & Securities: $43.3 millin Investrs Title Insurance C. ( Investrs ) Regulated in Nrth Carlina Admitted Assets: $140.4 millin Liabilities: $67.9 millin Surplus: $72.5 millin Premiums: $68.3 millin Premiums/Surplus: 0.9x Natinal Investrs Title Insurance C. ( Natinal ) Regulated in Texas Admitted Assets: $14.4 millin Liabilities: $3.8 millin Surplus: $10.6 millin Premiums: $40.9 millin Premiums/Surplus: 3.9x Other ITEC ITAC ITMS Investrs Trust

17 Capital Analysis Investrs OpC Investrs (OpC) Balance Sheet 2014 (in $ millins) Assets Nn-Admitted Admitted Cash (1 ) Bnds Equity (2 ) (3 ) Other Invested Assets Other Assets Ttal Admitted Assets Other Payables 16.8 Ttal Liabilities 67.9 Surplus as Regards Plicyhlders 72.5 Investrs Net Premiums Written Premium t Surplus Surplus as Regards Plicyhlders -Surplus Required at 2:1 Excess Capital (1) Includes shrt-term investments x (2) Includes Preferreds. (3) Investrs wns $21 millin wrth cmmn shares f ITIC and in accrdance with NAIC Securities Valuatin, admitted assets have been reduced by $12.3MM. 16

18 Capital Analysis Investrs OpC 2014 Dividend Allwed Dividend Paid t Parent Dividend Allwed (1) 7.3 (1) Statutry Annual Reprt - Nte 13 Assuming premiums written stays cnstant, Investrs culd pay ver $7 millin a year in dividends t the HldC. (Nte: this wuld nt require special regulatry apprval frm each state) Investrs currently has ver $38 millin in excess capital which des nt include the additinal $12 millin f ITIC stck cnsidered Nn-Admitted (Investrs has ver $21 millin f ITIC cmmn stck yet nly $9 millin is Admitted ). 17

19 Capital Analysis Natinal OpC Natinal (OpC) Balance Sheet 2014 (in $ millins) Assets Nn-Admitted Admitted Cash (1 ) Bnds Equity (2 ) Other Invested Assets Other Assets Ttal Admitted Assets Other Payables 1.3 Ttal Liabilities 3.8 Surplus as Regards Plicyhlders 10.6 Net Premiums Written 40.9 Premium t Surplus 3.9x We believe Natinal will nt pay a dividend in the near future due t (1) the segment is perating at an ptimal underwriting capacity f ~4.0x premiums t surplus; and (2) Natinal histrically has nt paid a dividend t the Parent. Surplus as Regards Plicyhlders 10.6 (1) Includes shrt-term investments (2) Includes Preferreds. 18

20 Capital Analysis HldC Investrs Title HldC (in $ millins) 2014 Cash (1 ) 8.2 Bnds 24.4 Equity (2 ) 2.5 Other Invested Assets 1.6 Other Assets 6.7 Ttal Admitted Assets 43.3 Other Payables 2.2 Ttal Liabilities 2.2 Equity fr Parent and ITIC 41.2 (1 ) Includes shrt-term investments (2 ) Includes Preferreds. (3 ) Parent des nt include investments in affiliates There is ver $35 millin in cash, bnds and equities at the HldC. GrizzlyRck and Grveland assume Investrs Title is nt in a psitin t distribute the full amunt. Yet, the Cmpany culd distribute at least $25 millin ($12.50 per share) leaving the Cmpany with ver $10 millin which wuld have cvered the $2.0 millin EBITDA lss during 2008 five times ver. 19

21 Excess Capital Cnclusin Investrs Title (HldC) Excess Cash & Securities Investrs (Sub) (1) Statutry Annual Reprt - Nte 13 $25.0 millin 2015 Dividend Allwed (1) $7.3 millin 2016 Dividend $7.3 millin 2017 Dividend $7.3 millin 2018 Dividend $7.3 millin Realistic Dividend ver next 4 Years $54.2 millin Investrs Title has clse t $75 millin in excess capital and culd return ver $50 millin t sharehlders ver the next fur years withut regulatry apprval. 20

22 Table f Cntents Investrs Title Overview Excess Capital Valuatin Analysis Appendix Executive Summary A.M. Best Key Stats and Enterprise Value Histrical Perfrmance Cmpany Descriptin Excess Capital Price t Bk Direct vs Independent Agent Financial Metrics Snapsht Asset Base Intrinsic Valuatin Title American / Independence Business Operatin Distributin Optins Cmparable Businesses Industry Analysis 21

23 Key Valuatin Statistics Current Metrics ($MMs except per share values) (1) Share Price 10/01/ Dividend Yield 0.4% Fully-Diluted Shares 06/30/ TTM EBITDA 16.0 Market Capitalizatin 10/01/ EV t EBITDA 4.3x + Claim Reserve Liability 38.1 Excess Capital $75 + Inv Held fr Regulatry Needs 48.4 Excess Capital/share $37 + Additinal Investments Held t Ensure an AM Best 'a' Rating 7.0 TTM P/E Rati 12.9x - Investments at 6/30/ FCF t EV 11.1% - Cash at 06/30/ TTM Return n Equity 8.0% Enterprise Value 10/01/ Price t Bk 1.0x (1) See slides n Enterprise Value Calculatin and Excess Capital Calculatin 22

24 Enterprise Value Calculatin Enterprise Value Surce Share Price 10/01/15 $71.50 Clsing Price n 10/01/15 Fully-Diluted Shares 10/01/ millin shares Per Q Q Market Capitalizatin 9/28/15 $144 millin Summatin + Claim Reserve Liability $38 millin Investments Fr Current Claim Reserves + Inv Held fr Regulatry Needs t Cntinue Underwriting New Plicies $48 millin Per Page 47 f Cmpany K + Additinal Investments t Ensure an AM Best 'a' Rating $7 millin 2014 plicies underwritten f $110m requires ~ $55m statuatry surplus t maintain a 2:1 relatinship ($55m - $48m = $7m) - Investments at 6/30/15 $149 millin Per Q Q (inc. equities, bnds and shrt-term investments) - Cash at 6/30/15 $20 millin Per Q Q (cash and accrued interest and dividends) Enterprise Value $68.9 millin Summatin 6/30/15 LTM EBITDA $17.2 millin 4.0x EV/EBITDA 6/30/15E EBITDA ex Independence (1) $16.0 millin 4.3x EV/EBITDA (1) Discussed in Appendix 23

25 Base Case Intrinsic Value Assumptins Ttal Sales in 2015 wuld stay cnsistent as 2014 ex Independence. Grwth after 2015 is 4.0%. Cst f Sales includes Cmmissins t agents and Prvisin fr claims. Grss Margin is the grss margin in 2014 ex Independence f 50.0%. Selling Expenses includes salaries, emplyee benefits and payrll taxes, ffice ccupancy and peratins, business develpment and prfessinal and cntract labr fees. Selling Expense as percent f Revenue is the selling expense in 2014 ex Independence. G&A Expense includes filing fees, premium and retaliatry taxes and ther. CapEx: $2.0 millin in 2015 and then nrmalized t $1.5 millin after the CFPB csts rll ff. 24

26 Base Case Intrinsic Value 12/30/12 12/30/13 12/31/ E 2016E 2017E 2018E 2019E Revenue Sales Grwth N/A (1 ) 4.0% 4.0% 4.0% 4.0% Grss Margin 43.1% 47.3% 42.4% 50.0% 50.0% 50.0% 50.0% 50.0% EBITDA EBITDA Margin 14.8% 18.0% 12.1% 15.4% 15.4% 15.9% 16.4% 16.9% Free Cash Flw t the Firm 12/30/ /30/ /31/2014 1/1/2015 1/2/2015 1/3/2015 1/4/2015 1/5/2015 EBIT(1-t) NCC ΔWC 0.3 (1.1) 5.4 (1.7) CapEx (0.6) (1.4) (2.0) (2.0) (1.5) (1.5) (1.5) (1.5) Free Cash Flw t the Firm Earnings Per Share (1) Nt cmparable t years prir given the valuatin assumes cmplete lss f Independence peratins. 25

27 Base Case Intrinsic Value Perpetuity Grwth Methd EBITDA Multiple Methd EPS Methd WACC 10.0% EBITDA in Terminal Year 19 EPS in 2016 $4.85 Terminal FCFF Grwth Rate 3.0% Exit Multiple 8.5x Earnings Multiple 17.0x Terminal Value 187 Terminal Value 164 NPV f Terminal Value 116 NPV f Terminal Value 102 NPV f FCFF 39 NPV f FCFF 39 Enterprise Value (as calculated) 155 Enterprise Value (as calculated) 141 Equity Value 155 Equity Value 141 Diluted Shares 2.0 Diluted Shares 2.0 Equity Value Per Share 77 Equity Value Per Share 70 Excess Capital Per Share 37 Excess Capital Per Share 37 Excess Capital Per Share $37 Equity Value Per Share $114.5 Equity Value Per Share $107.2 Equity Value Per Share $119.7 Average f Each Methd $114 per share Base Case Intrinsic Value Implies a 60% Price Increase 26

28 EBITDA Recnciliatin EBITDA (2) 2014 LTM (3) Net Incme 8.4 (1.2) Taxes 3.4 (2.0) Depr & Amrt Impairments & Other (1 ) EBITDA 13.3 (0.8) year-ver-year grwth -106% N/A 29% 8% 61% 33% -34% 15% (1) Impairment charges n certain investments and ther assets that were deemed t be therthan temprarily-impaired. (2) Changes in actuarial inputs in 2013 resulted in a reductin f $2.2 millin in reserves as well as a $2.2 millin prvisin fr claims perating expense (Increased net incme by $1.45 millin r $0.70 per diluted share) (3) $17.2 millin f EBITDA includes Texas American Title. Pr Frma EBITDA is $16.0 millin. 27

29 Industry Enterprise Value t EBITDA 16.0x Title Insurance Histrical Adj EV t EBITDA 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 2008 Data Skewed by Negative EBITDA fr Many Mrtgage Title Firms 0.0x Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 ITIC FAF FNF STC 28

30 Base Case Valuatin Based n Bk Value Per Share Base Case Using Mid-Cycle EBITDA f $16.0MM $ in MM's FY2014 FY2015E FY2016E FY2017E FY2018E FY2019E Beginning Equity $137.6 $147.5 $157.4 $167.3 $177.2 EBITDA Less: D&A Plus: Pre-Tax Incme Less: 30% Less: Dividends Ending Bk Value $137.6 $147.5 $157.4 $167.3 $177.2 $187.1 Per Share $73.4 $78.3 $83.2 $88.2 $93.1 Share Price at 1.00x BV $73 $78 $83 $88 $93 Share Price at 1.25x BV $92 $98 $104 $110 $116 Share Price at 1.50x BV $110 $117 $125 $132 $140 Share Price at 1.75x BV $128 $137 $146 $154 $163 Share Price at 2.00x BV $147 $157 $166 $176 $186 Return at 1.00x BV 3% 10% 16% 23% 30% Return at 1.25x BV 28% 37% 46% 54% 63% Return at 1.50x BV 54% 64% 75% 85% 95% Return at 1.75x BV 80% 92% 104% 116% 128% Return at 2.00x BV 105% 119% 133% 147% 160% 29

31 Base Case Price t Tangible Bk Value Title Insurance Histrical P/TBV Relatinship 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x ITIC FAF FNF STC Average f FNF, FAF, and Stewart 30

32 Key Statistics fr Cmparable Public Businesses LTM Fr Perid Ended 6/30/2015 6/30/2015 6/30/2015 6/30/2015 6/30/2015 Stewart Fidelity Old Republic First American Infrmatin Investrs Natinal Internatinal Financial Services Title C. Financial, Inc. Crpratin Crpratin Crpratin Ticker NYSE:STC NYSE:FNF NYSE:ORI NYSE:FAF ITIC Cash Flws Frm Ops ($ in MMs) (50) CapEx ($ in MMs) (22) (230) 0 (119) (2) Free Cash Flw ($ in MMs) (50) Stck Price $41.4 $36.9 $15.9 $39.5 $71.2 Return n Assets 4.2% 4.5% 2.0% 3.9% 5.0% Return n Capital 7.6% 6.5% 7.3% 9.5% 7.2% Return n Equity 7.4% 10.8% 9.0% 11.3% 8.2% TEV/EBITDA 10.9x 9.6x 8.4x 6.9x 4.5x Price t Bk Value 1.4x 1.7x 1.0x 1.6x 1.0x Price t Tangible Bk Value 3.1x NM 1.0x 3.9x 1.0x * EV fr FAF, STC and FNF calculated as M arket Cap + Debt + Claim Reserves + Surplus/Equity required t maintain current premium t surplus leverage + depsits liability - cash - investments 31

33 Table f Cntents Investrs Title Overview Excess Capital Valuatin Analysis Appendix Executive Summary A.M. Best Key Stats and Enterprise Value Histrical Perfrmance Cmpany Descriptin Excess Capital Price t Bk Direct vs Independent Agent Financial Metrics Snapsht Asset Base Intrinsic Valuatin Title American / Independence Business Operatin Distributin Optins Cmparable Businesses Industry Analysis 32

34 Histrical Financial Perfrmance $MMs except per share values 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14 LTM 6/30/15 Sales Cst f Sales Grss Prfit Grss Margin 59.7% 54.6% 39.6% 47.1% 50.0% 41.6% 43.1% 47.3% 42.4% 45.1% Pretax Incme (3.2) Incme Tax Expense (Benefit) (2.0) Net Incme (1.2) Diluted Shares Outstanding Earnings Per Share $5.14 $3.35 ($0.50) $2.10 $2.78 $3.20 $5.33 $7.17 $4.76 $5.51 Dividends Per Share $0.24 $0.24 $0.28 $0.28 $0.28 $0.28 $0.29 $0.32 $0.32 $0.32 Ttal Assets Owners Equity (Bk Value) The Cmpany has been prfitable 9 f the last 10 years, paid a cnsistent dividend, increased premiums at ~4% per annum, decreased shares utstanding by 3% per annum, and cmpunded bk value per share at ~10% per annum. 33

35 Investrs Title Premium Written by State 2OO6 2O1O State ITIC State ITIC State ITIC State ITIC State ITIC Nrth Carlina year-ver-year grwth 4% -2% -29% -13% -10% -9% -14% -14% Texas 1, , , , , year-ver-year grwth -3% N/A -23% N/A -18% N/A 5% N/A Suth Carlina year-ver-year grwth -5% 7% -28% 0% -11% -24% -6% 10% Virginia year-ver-year grwth -17% -7% -29% -7% 8% -13% 0% -14% Michigan year-ver-year grwth -20% -11% -18% 7% -3% 33% 1% -6% Gergia year-ver-year grwth -11% N/A -35% -44% -5% 95% 2% 84% New Yrk 1, , year-ver-year grwth 0% -1% -36% -13% -23% 35% 13% -7% Natinwide 16, , , , , year-ver-year grwth -14% 0% -29% -10% -4% -1% 0% -1% Investrs Title was able t utperfrm the industry during a tugh perid due t strng diversificatin and substantial grwth in their smaller states.

36 Investrs Title Premium Written by State 2O11 2O State ITIC State ITIC State ITIC State ITIC Nrth Carlina year-ver-year grwth 0% -8% 28% 47% 18% 0% -19% -2% Texas 1, , , , year-ver-year grwth 9% 1127% 24% -3% 19% 20% 1% 31% Suth Carlina year-ver-year grwth -5% 6% 19% 31% 22% 51% -10% -35% Virginia year-ver-year grwth -7% -2% 18% 30% 13% -5% -25% -5% Michigan year-ver-year grwth -1% 5% 22% 18% 15% 3% -17% -30% Gergia year-ver-year grwth -5% -33% 30% 724% 19% 158% -8% 56% New Yrk year-ver-year grwth 8% -11% 15% 20% 20% -36% -2% -17% Natinwide 9, , , , year-ver-year grwth -2% 32% 21% 26% 11% 12% -11% -4% Texas cntributin grew significantly frm 2011 t Gergia has als becme fairly meaningful.

37 Investrs Title Premium Written Analysis by State State Nrth Carlina 49% 48% 43% 38% 27% 31% 27% 28% Texas 3% 32% 25% 27% 36% Suth Carlina 11% 12% 9% 10% 8% 9% 11% 8% Virginia 9% 9% 8% 7% 5% 5% 4% 4% Michigan 4% 5% 7% 7% 5% 5% 5% 3% Gergia 1% 2% 4% Other 27% 26% 32% 35% 23% 25% 23% 16% Ttal 100% 100% 100% 100% 100% 100% 100% 100% Investrs Title has been grwing by develping strng relatinships with independent agents. In 2010 the Cmpany executed a plan t enter the Texas market by partnering with a team already entrenched in that market. 36

38 Investrs Title Market Share f Ttal State Vlume Nrth Carlina 20.5% 19.3% 23.6% 24.1% 24.0% 22.2% 25.3% 21.5% 26.1% Texas 0.0% 0.0% 0.0% 0.0% 0.2% 2.3% 1.8% 1.8% 2.3% Suth Carlina 4.8% 5.4% 7.5% 6.4% 7.5% 8.4% 9.2% 11.4% 8.3% Virginia 1.5% 1.6% 2.1% 1.7% 1.5% 1.6% 1.7% 1.5% 1.8% Michigan 0.9% 1.0% 1.3% 1.7% 1.6% 1.7% 1.7% 1.5% 1.3% Gergia 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.5% 1.1% 1.9% New Yrk 0.2% 0.2% 0.3% 0.5% 0.4% 0.3% 0.3% 0.2% 0.2% Natinwide 0.4% 0.5% 0.6% 0.6% 0.6% 0.9% 0.9% 0.9% 1.0% Even during challenging years fr the industry (such as 2008 and 2011), Investrs Title has leveraged strng underwriting metrics and relatinships t gain market share. 37

39 Investrs Title Histrical Claim Prvisins $ in millins (1) 2014 Begininning f Year Reserves Current Year Claim Expenses Prir Years Claim Expenses (1.7) (2.4) 0.3 (0.4) 0.7 (2.3) (3.5) (1.6) (7.8) (1.6) Net Claim Expenses (0.6) 5.2 Current Year Claims Paid Prir Years Claims Paid Net Claims Paid Year End Claim Reserves (2) Net Premiums Written (1) Changes in actuarial inputs in 2013 resulted in a reductin f $2.2 millin in reserves as well as a $2.2 millin prvisin fr claims perating expense (Increased net incme by $1.45 millin r $0.70 per diluted share) (2) Year End Claim Reserves = Beginning f Year Reserves + Net Claim Expenses Net Claims Paid 38

40 Investrs Title Histrical Claim Prvisins 0.25x Histrical Prvisin fr Claims/Premiums Relatinship 0.20x 0.15x 0.10x 0.05x 0.00x Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec x ITIC FAF FNF STC The Cmpany has histrically been cnservative with their Prvisin fr Claims estimates. Recently they have changed their actuarial inputs t better reflect actual claims. 39

41 Direct Versus Independent Agent LTM 6/3O/15 Analysis LTM Analysis (in $ millins) Direct Agent (Hme and Branch) Independent Agent Cmbined Direct and Independent Net Premiums Written Agent Cmmissins Adj. Net Premiums Written Investment Incme & Gains 5.1 Other 9.5 Revenue (Net f Agent Cmmissins) 61.9 Expenses - Prvisin fr Claims Salaries, Emplyee Benefits (1 ) Other Expenses (2 ) 14.1 EBITDA $17.2 Direct Agent: In the Cmpany s hme and branch peratins, the Cmpany issues the insurance plicy and retains the entire premium as n cmmissins are paid in cnnectin with these plicies. Independent Agents: When a plicy is written thrugh a title agency, the premium is shared between the agency and the underwriter. Agent cmmissins represent the prtin f premiums retained by agents pursuant t the terms f their respective agency cntracts. 40

42 Net Premiums Written by Direct vs. Independent Agents Plicy Originatin % Hme and Branch 43% 38% 35% 29% 20% 23% 22% 22% Agent 57% 62% 65% 71% 80% 77% 78% 78% Ttal 100% 100% 100% 100% 100% 100% 100% 100% As Investrs Title has diversified their presence acrss states, the Cmpany has seen a prprtinal increase f their business with independent agents. Revenue frm independent agents prvide a much lwer margin as the Cmpany pays ~80% f premium written as cmmissins t independent agents. 41

43 Independence Title Acquisitin by Title Resurce (Realgy) In 2010, Investrs Title began t partner with Independence Title t grw premiums in Texas. Investrs Title was underwriting the insurance prtin f the title plicies that Independence s agents were issuing & perfrming the analysis (i.e. nn-branch mdel relying n nn-investrs Title agents). Independence Title made up 23.6% f ITIC s premiums written fr FY This nly represented 8.8% f the net premiums written after cmmissins. In June 2015, Title Resurce Grup ( TRG ) (subsidiary f Realgy Hldings) acquired Independence Title. Investrs Title did nt bid during the sales prcess and des nt view purchasing title agencies as a grwth driver ging frward. Texas American Title Cmpany Independence Title (Name f Texas Operating Subsidiary) 42

44 Estimatin LTM 6/3O/15 ex-independence Title LTM Analysis (in $ millins) Direct Agent (Hme and Branch) Independent Agent Cmbined Direct and Independent Independence Title Pr Frma ex- Independence Title Net Premiums Written Agent Cmmissins Adj. Net Premiums Written Investment Incme & Gains Other Revenue (Net f Agent Cmmissins) Expenses - Prvisin fr Claims Salaries, Emplyee Benefits (1 ) Other Expenses (2 ) EBITDA $17.2 $1.2 $16.0 Surce: GrizzlyRck Estimates. (1 ) Depreciatin f $1.6 millin remved frm this line item. (2 ) Other Expenses inc. ffice, business develpment, filing fees, premium & retaliatry taxes, prfessinal fees, and ther. Figures are frm 2014 as we d nt have LTM statuatry figures. 43

45 Ptential Impact f Independence Title Vlume Lss With the anticipated reductin frm Independence s premium vlume, Investrs Title will either have even higher excess capital r they will fill the vlume reductin with premiums frm new surces. Replace Vlume Cmpany will have t lk fr new surces t fill this revenue. This culd be thrugh (1) existing relatinships (2) new agency cntacts r (3) new gegraphic regins, r (4) strategic merger with anther title firm. Excess Surplus If Investrs Title des nt replace premiums written they will have additinal excess capital with the assciated ptential t distribute excess capital t sharehlders. 44

46 Mrtgage Title Insurance Industry Analysis What is Mrtgage Title Insurance? Title insurance is a frm f indemnity insurance which insures against financial lss frm defects in title t real prperty and frm the invalidity r unenfrceability f mrtgage lans. Title insurance is principally a prduct develped and sld in the United States as a result f an alleged cmparative deficiency f land recrds. It is meant t prtect an wner's r a lender's financial interest in real prperty against lss due t title defects, liens r ther matters. It will defend against a lawsuit attacking the title, r reimburse the insured fr the actual mnetary lss incurred, up t the dllar amunt f insurance prvided by the plicy. Typically the real prperty interests insured are fee simple wnership r a mrtgage. Hwever, title insurance can be purchased t insure any interest in real prperty, including an easement, lease r life estate. There are tw types f plicies - wner and lender. Just as lenders require fire insurance and ther types f insurance cverage t prtect their investment, nearly all institutinal lenders als require title insurance [a lender plicy] t prtect their interest in the cllateral f lans secured by real estate. Buyers purchasing prperties fr cash r with a mrtgage lender ften want title insurance [an wner plicy] as well. A lan plicy prvides n cverage r benefit fr the buyer/wner and s the decisin t purchase an wner plicy is independent f the lender's decisin t require a lan plicy. 45

47 Hw Des Mrtgage Title Insurance Wrk? In title insurance, the agent retains a fairly large prprtin f the fee (~70% t ~90% f amunt charged) given the labr intensive title claim diligence required. Agents prvide nly a service and let the underwriters assume the insurance liability. Agents activities nt nly reflect a sales cmmissin but als incrprate underwriting, lss preventin and administratin csts that title insurers wuld incur if plicies were issued directly. Title insurers als typically generate far lwer investment incme frm underwriting as cmpared with prperty/casualty cmpanies because f the large, up-frnt cmmissin payment t title agencies. Reprted net-premium-t-surplus ratis typically range frm 3-1 t 5-1 fr the title insurance industry. Certain privately held title insurers are perating in ratis in excess f 8-1. Title insurers carry a statutry liability knwn as statutry premium reserve ( SPR ), which is mandated by each state t be kept aside t prvide ultimate lss prtectin t plicyhlders. Rules fr maintaining the level and length f time f these reserves vary by state. T cmpare cmpanies dmiciled in different states, the excess f the SPR ver incurred but nt reprted (IBNR) reserves n a tax-effected basis is treated as an adjustment t surplus when calculating a title cmpany s verall capitalizatin and its leverage and return nsurplus ratis. The excess f the change in SPR ver change in IBNR is treated as an adjustment t earnings when calculating the lss rati as well as return n revenue. Cmpanies that have mre flexible perating cst structures (i.e. including a balanced distributin mix between agency &direct) tend t adapt better t rapidly changing ecnmic cnditins. 46

48 Land Title Insurance Purchase versus Refinancing Refinances t Purchases The mix between purchases and refinances is anther imprtant relatinship that can affect revenue and margins. Purchases typically have much higher premiums than refinances was the first purchase dminated market the industry has seen since the crisis f Predminantly been due t the lw interest rate envirnment. 47

49 Mrtgage Originatins 48

50 Industry Grwth in Investrs Title s Primary States State Nrth Carlina 4% -29% -10% -14% 0% 28% 18% -19% Texas -3% -23% -18% 5% 9% 24% 19% 1% Suth Carlina -5% -28% -11% -6% -5% 19% 22% -10% Virginia -17% -29% 8% 0% -7% 18% 13% -25% Michigan -20% -18% -3% 1% -1% 22% 15% -17% Gergia -11% -35% -5% 2% -5% 30% 19% -8% New Yrk 0% -36% -23% 13% 8% 15% 20% -2% Natinwide -14% -29% -4% 0% -2% 21% 11% -11% Mrtgage Title Insurance is a cyclical industry based n hme sales trends which are (in turn) dependent n interest rates, cnsumer cnfidence, and general ecnmic cnditins. 49

51 Industry Market Share The Big 4 Families maintain ~90% f ttal industry premiums (1) Investrs Title is the 10 th largest title insurance underwriter verall and the 5 th largest independent underwriter (2) In the state f Nrth Carlina, the Cmpany is the largest independent title underwriter and nly 2 nd t the Fidelity Family. Investrs Title is als tp 5 within the state f Suth Carlina (1) Surce: AM Best Methdlgy May 26 th, 2015 (2) Surce: AM Best Rating f Investrs Title Nrth Carlina Subsidiary June

52 Cnsumer Finance Prtectin Bard Upcming Changes TILA-RESPA Integratin Disclsure (aka Knw Befre Yu Owe ) Originally prpsed back in 2012 yet nt finalized until Nvember August 2015 implementatin has been pushed back until Octber The gal f the new regulatin is t prvide greater clarity fr the cnsumer. Cmbining the Initial TIL and GFE int ne dcument, which will nw be called the Lan Estimate Frm. Cmbining the Final TIL and Hud-1 int ne frm which will nw be called the Clsing Disclsure Frm. Three Day Rule which mandates that cnsumers have enugh time t review dcuments prir t settlement. Making a mre frmal disclsure that Owners insurance is ptinal. 51

53 CFPB Risk Analysis Optinal Disclsure Owners title insurance has always been ptinal, but nw the wrd ptinal is being displayed in a mre frmal manner. After speaking with several members f the title insurance industry it appears the impact frm this disclsure will be minimal if any. 52

54 CFPB Risk Analysis (Cnt.) Increased csts assciated with new technlgy and training. Sme csts already ccurred with remainder ccurring ver the next 2-3 quarters. The Big 4 will prbably spend $5-$10 millin each while Stewart Title is expected t spend ~$3-4 millin. Industry analysts expect these charges t be expensed during Q2 and Q We assume Investrs Title will pay ~$500k. Smaller agents might incur $15-30k. At implementatin, likely initial clsing delays (typical clsing taking an extra week r tw). The industry shuld be able t handle changes, given underwriters and agents have generally prepared in advance. Sme much smaller players culd struggle with cmpliance changes. Ptential fr sme cnslidatin and market share grwth. 53

55 Tp US Mrtgage Title Insurance Firms Cmpany 2014 Premium Written Market Share by Premium Ownership Ticker / Name If Public Ownership Cmmentary First American Title Ins. C. 2,956,204, % Public FAF Old Republic Natinal Title Ins. C. 1,624,701, % Public ORI Chicag Title Ins. C. 1,666,872, % Public FNF Fidelity Natinal Title Ins. C. 1,315,832, % Public FNF Stewart Title Guaranty C. 1,197,703, % Public STC Cmmnwealth Land Title Ins. C. 548,209, % Public FNF Westcr Land Title Ins. C. 299,420, % Private N Investr Inf n CapIQ WFG Natinal Title Ins. C. 214,805, % Private Start-Up / Rll-Up Backed by Glden Gate in 2009 Title Resurces Guaranty C. 232,312, % Public Realgy Stewart Title Ins. C. (NY) 223,557, % Public Stewart Nrth American Title Ins. C. 156,822, % Public Lennar Natinal Title Ins. f NY 90,224, % Public BKFS Black Knight Financial Services, Inc. Alliant Natinal Title Ins. C. 75,911, % Private Private Equity firm Crescend in Clrad Investrs Title Ins. (N. Carlina) $68,779, % Public ITIC Alam Title Ins. C. 62,946, % Public Fidelity Natinal Attrneys' Title Guaranty Fund (IL) 67,077, % Private N Investr Inf n CapIQ Cnnecticut Attrneys Title Ins. C. 60,014, % Private N Investr Inf n CapIQ Natinal Investrs Title Ins. C. $41,439, % Public ITIC 54