ITIC_2014.09.30_10Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2014

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 COMPANY
(Exact name of registrant as specified in its charter)
 
North Carolina
 
56-1110199
 
 
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
                                        
121 North Columbia Street, Chapel Hill, North Carolina 27514
(Address of principal executive offices)  (Zip Code)

(919) 968-2200
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     X    No        
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes    X    No        

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large accelerated filer
 
 
Accelerated filer
X
 
Non-accelerated filer
 
 
Smaller reporting company
 
 
 
 
 
 
 
(do not check if a smaller reporting company)
 
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Yes         No     X   

As of October 17, 2014, there were 2,028,818 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 September 30, 2014 and December 31, 2013
 
 
 
 
Consolidated Statements of Income For the Three and Nine Months Ended September 30, 2014 and 2013
 
 
 
 
Consolidated Statements of Comprehensive Income For the Three and Nine Months Ended September 30, 2014 and 2013
 

 
 
Consolidated Statements of Stockholders’ Equity For the Nine Months Ended September 30, 2014 and 2013
 
 
 
 
Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2014 and 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II.
OTHER INFORMATION
 
 
 
 
Legal Proceedings
 
 
 
Risk Factors
 
 
 
 
 
 
 
 
 
 




PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of September 30, 2014 and December 31, 2013
(Unaudited)
 
September 30,
2014
 
December 31,
2013
Assets:
 
 
 
Investments in securities:
 
 
 
Fixed maturities, available-for-sale, at fair value (amortized cost: 2014: $90,366,745; 2013: $87,980,160)
$
94,995,138

 
$
91,445,413

Equity securities, available-for-sale, at fair value (cost: 2014: $23,498,121; 2013: $22,200,369)
37,461,674

 
36,144,065

Short-term investments
6,154,749

 
7,926,373

Other investments
7,950,676

 
7,247,831

Total investments
146,562,237

 
142,763,682

 
 
 
 
Cash and cash equivalents
23,622,522

 
23,626,761

Premium and fees receivable
8,489,096

 
8,750,224

Accrued interest and dividends
1,151,250

 
1,006,698

Prepaid expenses and other assets
8,677,087

 
7,466,141

Property, net
5,369,084

 
4,325,538

Current income taxes recoverable
1,624,024

 
366,772

Total Assets
$
195,495,300

 
$
188,305,816

 
 
 
 
Liabilities and Stockholders’ Equity
 

 
 

Liabilities:
 

 
 

Reserves for claims
$
36,252,000

 
$
35,360,000

Accounts payable and accrued liabilities
18,683,691

 
20,324,190

Deferred income taxes, net
5,893,471

 
4,013,983

Total liabilities
60,829,162

 
59,698,173

 
 
 
 
Commitments and Contingencies

 

 
 
 
 
Redeemable Noncontrolling Interest

 
545,489

 
 
 
 
Stockholders’ Equity:
 

 
 

Preferred stock (1,000,000 authorized shares; no shares issued)

 

Common stock - no par value (10,000,000 authorized shares; 2,028,818 and 2,037,135 shares issued and outstanding 2014 and 2013, respectively, excluding 291,676 shares for 2014 and 2013 of common stock held by the Company's subsidiary)
1

 
1

Retained earnings
122,545,561

 
116,714,749

Accumulated other comprehensive income
12,120,576

 
11,347,404

Total stockholders’ equity
134,666,138

 
128,062,154

Total Liabilities and Stockholders’ Equity
$
195,495,300

 
$
188,305,816


See notes to the Consolidated Financial Statements.

1



Investors Title Company and Subsidiaries
Consolidated Statements of Income
For the Three and Nine September 30, 2014 and 2013
(Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Net premiums written
$
26,356,835

 
$
30,431,560

 
$
81,115,940

 
$
84,787,318

Investment income - interest and dividends
1,064,995

 
990,338

 
3,130,846

 
2,835,870

Net realized gain on investments
8,689

 
261,938

 
592,908

 
333,554

Other
2,077,711

 
1,921,403

 
6,344,163

 
6,190,170

Total Revenues
29,508,230

 
33,605,239

 
91,183,857

 
94,146,912

 
 
 
 
 
 
 
 
Operating Expenses:
 

 
 
 
 

 
 

Commissions to agents
14,440,264

 
18,142,697

 
48,242,923

 
49,240,917

Provision (benefit) for claims
1,507,814

 
(3,037,101
)
 
4,177,478

 
(2,429,289
)
Salaries, employee benefits and payroll taxes
6,609,425

 
7,133,497

 
19,250,116

 
19,533,970

Office occupancy and operations
1,257,009

 
1,165,772

 
3,683,980

 
3,266,112

Business development
552,215

 
606,549

 
1,581,872

 
1,487,635

Filing fees, franchise and local taxes
233,079

 
141,373

 
648,022

 
510,893

Premium and retaliatory taxes
491,927

 
592,717

 
1,332,492

 
1,563,764

Professional and contract labor fees
621,305

 
404,206

 
1,976,272

 
1,514,749

Other
196,702

 
179,006

 
656,653

 
560,170

Total Operating Expenses
25,909,740

 
25,328,716

 
81,549,808

 
75,248,921

 
 
 
 
 
 
 
 
Income before Income Taxes
3,598,490

 
8,276,523

 
9,634,049

 
18,897,991

 
 
 
 
 
 
 
 
Provision for Income Taxes
1,004,000

 
2,733,000

 
2,656,000

 
5,944,000

 
 
 
 
 
 
 
 
Net Income
2,594,490

 
5,543,523

 
6,978,049

 
12,953,991

 
 
 
 
 
 
 
 
Net Income Attributable to Redeemable Noncontrolling Interest

 
(27,725
)
 
(23,523
)
 
(55,788
)
 
 
 
 
 
 
 
 
Net Income Attributable to the Company
$
2,594,490

 
$
5,515,798

 
$
6,954,526

 
$
12,898,203

 
 
 
 
 
 
 
 
Basic Earnings per Common Share
$
1.28

 
$
2.67

 
$
3.42

 
$
6.26

 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding – Basic
2,028,818

 
2,069,081

 
2,033,637

 
2,059,226

 
 
 
 
 
 
 
 
Diluted Earnings per Common Share
$
1.28

 
$
2.66

 
$
3.41

 
$
6.19

 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding – Diluted
2,032,644

 
2,074,940

 
2,038,875

 
2,083,560

 
 
 
 
 
 
 
 
Cash Dividends Paid per Common Share
$
0.08

 
$
0.08

 
$
0.24

 
$
0.24


See notes to the Consolidated Financial Statements.

2



Investors Title Company and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Three and Nine September 30, 2014 and 2013
(Unaudited)
 
Three Months Ended
 September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Net income
$
2,594,490

 
$
5,543,523

 
$
6,978,049

 
$
12,953,991

Other comprehensive (loss) income, before tax:


 


 
 

 
 

Amortization (accretion) related to prior year service cost
554

 
(380
)
 
1,663

 
(1,139
)
Amortization of unrecognized loss

 
1,573

 

 
4,720

Unrealized (losses) gains on investments arising during the period
(960,948
)
 
1,115,120

 
2,023,167

 
1,864,591

Reclassification adjustment for sales of securities included in net income
(6,534
)
 
(261,938
)
 
(840,170
)
 
(367,624
)
Reclassification adjustment for write-downs of securities included in net income

 

 

 
34,070

Other comprehensive (loss) income, before tax
(966,928
)
 
854,375

 
1,184,660

 
1,534,618

Income tax expense related to postretirement health benefits
188

 
415

 
565

 
1,228

Income tax (benefit) expense related to unrealized (losses) gains on investments arising during the year
(332,034
)
 
385,115

 
699,001

 
645,438

Income tax benefit related to reclassification adjustment for sales of securities included in net income
(2,328
)
 
(89,575
)
 
(288,078
)
 
(126,173
)
Income tax expense related to reclassification adjustment for write-downs of securities included in net income

 

 

 
13,134

Net income tax (benefit) expense on other comprehensive (loss) income
(334,174
)
 
295,955

 
411,488

 
533,627

Other comprehensive (loss) income
(632,754
)
 
558,420

 
773,172

 
1,000,991

Comprehensive Income
$
1,961,736

 
$
6,101,943

 
$
7,751,221

 
$
13,954,982

Comprehensive income attributable to redeemable noncontrolling interest

 
(27,725
)
 
(23,523
)
 
(55,788
)
Comprehensive Income Attributable to the Company
$
1,961,736

 
$
6,074,218

 
$
7,727,698

 
$
13,899,194


See notes to the Consolidated Financial Statements.

3



Investors Title Company and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
Common Stock
 
Retained Earnings

 
Accumulated
Other
Comprehensive
Income

 
Total
Stockholders’
Equity

 
Shares
 
Amount
 
 
 
Balance, January 1, 2013
2,043,359

 
$
1

 
$
105,820,459

 
$
8,818,430

 
$
114,638,890

Net income attributable to the Company
 

 
 

 
12,898,203

 
 

 
12,898,203

Dividends ($0.24 per share)
 

 
 

 
(494,903
)
 
 

 
(494,903
)
Shares of common stock repurchased and retired
(26,436
)
 
 

 
(1,881,323
)
 
 

 
(1,881,323
)
Stock options and stock appreciation rights exercised
49,999

 
 

 
75,797

 
 

 
75,797

Share-based compensation expense
 

 
 

 
62,108

 
 

 
62,108

Amortization related to postretirement health benefits
 

 
 

 
 

 
2,353

 
2,353

Net unrealized gain on investments
 

 
 

 
 

 
998,638

 
998,638

Income tax benefit from share-based compensation
 
 
 
 
938,090

 
 
 
938,090

Balance, September 30, 2013
2,066,922

 
$
1

 
$
117,418,431

 
$
9,819,421

 
$
127,237,853

 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2014
2,037,135

 
$
1

 
$
116,714,749

 
$
11,347,404

 
$
128,062,154

Net income attributable to the Company
 

 
 

 
6,954,526

 
 

 
6,954,526

Dividends ($0.24 per share)
 

 
 

 
(488,127
)
 
 

 
(488,127
)
Shares of common stock repurchased and retired
(9,824
)
 
 

 
(652,657
)
 
 

 
(652,657
)
Stock options and stock appreciation rights exercised
1,507

 
 

 
27,100

 
 

 
27,100

Share-based compensation expense
 

 
 

 
88,291

 
 

 
88,291

Amortization related to postretirement health benefits
 

 
 

 
 

 
1,098

 
1,098

Net unrealized gain on investments
 

 
 

 
 

 
772,074

 
772,074

Purchase of redeemable noncontrolling interest of subsidiary
 
 
 
 
(114,320
)
 
 
 
(114,320
)
Income tax benefit from share-based compensation
 

 
 

 
15,999

 
 

 
15,999

Balance, September 30, 2014
2,028,818

 
$
1

 
$
122,545,561

 
$
12,120,576

 
$
134,666,138


See notes to the Consolidated Financial Statements.

4



Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
Nine Months Ended September 30,
 
2014
 
2013
Operating Activities
 
 
 
Net income
$
6,978,049

 
$
12,953,991

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation
583,979

 
444,689

Amortization, net
458,635

 
378,947

Amortization related to postretirement benefits obligation
1,663

 
3,581

Share-based compensation expense related to stock options
88,291

 
62,108

Net loss on the disposals of property
6,487

 
778

Net realized gain on investments
(592,908
)
 
(333,554
)
Net earnings from other investments
(990,657
)
 
(1,050,854
)
Provision (benefit) for claims
4,177,478

 
(2,429,289
)
Provision for deferred income taxes
1,468,000

 
3,833,000

Changes in assets and liabilities:
 

 
 

Decrease in receivables
261,128

 
1,278,965

Increase in other assets
(1,407,762
)
 
(2,771,634
)
Increase in current income taxes recoverable
(1,257,252
)
 
(1,708,257
)
(Decrease) increase in accounts payable and accrued liabilities
(1,640,499
)
 
5,853,711

Decrease in current income taxes payable

 
(1,336,824
)
Payments of claims, net of recoveries
(3,285,478
)
 
(1,832,711
)
Net cash provided by operating activities
4,849,154

 
13,346,647

 
 
 
 
Investing Activities
 

 
 

Purchases of available-for-sale securities
(13,572,217
)
 
(14,833,885
)
Purchases of short-term investments
(2,923,269
)
 
(4,886,789
)
Purchases of other investments
(1,036,110
)
 
(1,330,327
)
Proceeds from sales and maturities of available-for-sale securities
10,321,679

 
7,321,758

Proceeds from sales and maturities of short-term investments
4,694,893

 
3,065,790

Proceeds from sales and distributions of other investments
1,050,427

 
1,761,362

Proceeds from sales of other assets
26,233

 
22,808

Purchase of redeemable noncontrolling interest of subsidiary
(515,275
)
 

Purchases of property
(1,649,412
)
 
(1,063,985
)
Proceeds from the sale of property
15,400

 
17,335

Net cash used in investing activities
(3,587,651
)
 
(9,925,933
)
 
 
 
 
Financing Activities
 

 
 

Repurchases of common stock
(652,657
)
 
(1,881,323
)
Exercises of stock options and SARs
27,100

 
75,797

Distributions to noncontrolling interest
(168,057
)
 

Excess tax benefits related to exercise of stock options and SARs
15,999

 
938,090

Dividends paid
(488,127
)
 
(494,903
)
Net cash used in financing activities
(1,265,742
)
 
(1,362,339
)
 
 
 
 
Net (Decrease) Increase in Cash and Cash Equivalents
(4,239
)
 
2,058,375

Cash and Cash Equivalents, Beginning of Period
23,626,761

 
20,810,018

Cash and Cash Equivalents, End of Period
$
23,622,522

 
$
22,868,393


5




Consolidated Statements of Cash Flows, continued
 
 
Nine Months Ended September 30,
 
2014
 
2013
Supplemental Disclosures:
 
 
 
Cash Paid During the Year for:
 
 
 
Income tax payments, net
$
2,443,000

 
$
4,243,300

Non Cash Investing and Financing Activities
 
 
 
Non cash net unrealized gain on investments, net of deferred tax provision of $(410,923) and $(532,399) for 2014 and 2013, respectively
$
(772,074
)
 
$
(998,638
)

See notes to the Consolidated Financial Statements.

6



INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2014
(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, 2013 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 generally accepted accounting principles 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. Earnings attributable to the Company's redeemable noncontrolling interest in a majority-owned insurance agency are recorded in the Consolidated Statements of Income. The redeemable noncontrolling interest representing the portion of equity not related to the Company's ownership interest is recorded as redeemable equity in a separate section of the Consolidated Balance Sheets. 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 quarter ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

Reclassification Certain 2013 amounts in the accompanying unaudited Consolidated Financial Statements have been reclassified to conform to the 2014 classifications. These reclassifications had no effect on stockholders’ equity or net income as previously reported.

Immaterial Classification Correction During the nine months ended September 30, 2013, the Company realized $938,090 in excess tax benefits associated with the exercise of stock options and stock appreciation rights (“SARs”). Such amounts were mistakenly classified as part of operating activities rather than financing activities. Accordingly, the Consolidated Statements of Cash Flows have been corrected. The correction resulted in a decrease to previously reported operating cash flows and an increase to financing cash flows in the amount of $938,090 for the nine months ended September 30, 2013. There was no impact to the Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Stockholders’ Equity or to the Company’s cash position.

Allowance for Doubtful Accounts – Company management continually evaluates the collectability of receivables and provides an allowance for doubtful accounts equal to estimated losses expected to be incurred in the collection of premiums and fees receivable.  During the second quarter of 2014, the Company changed its presentation of gross premiums and fees receivable and related allowance for doubtful accounts and now reports them net of certain commitments not expected to result in issued title insurance policies.  The change had no impact to net premium and fees receivable, net premiums written, operating expenses or net income.

Use of Estimates and Assumptions – The preparation of the Company’s Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“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 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 concluded that there were no material subsequent events requiring adjustment to or disclosure in its Consolidated Financial Statements.


7



Recently Issued Accounting Standards – In May 2014, the Financial Accounting Standards Board (“FASB”) updated guidance to improve the comparability of revenue recognition practices for entities that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards such as insurance contracts or lease standards. The core principle of the guidance is that an entity should 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. For public entities, this update becomes effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. 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.

Note 2 - Reserves for Claims

Transactions in the reserves for claims for the nine months ended September 30, 2014 and the year ended December 31, 2013 are summarized as follows:
 
September 30, 2014
 
December 31, 2013
Balance, beginning of period
$
35,360,000

 
$
39,078,000

Provision (benefit), charged to operations
4,177,478

 
(571,596
)
Payments of claims, net of recoveries
(3,285,478
)
 
(3,146,404
)
Ending balance
$
36,252,000

 
$
35,360,000


The total reserve for all reported and unreported losses the Company incurred through September 30, 2014 is represented by the reserves for claims. The Company's reserves for unpaid losses and loss adjustment expenses are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy claims that have been incurred but not yet reported (“IBNR”). Despite the variability of such estimates, management believes that the reserves are adequate to cover claim losses which might result from pending and future claims under title insurance policies issued through September 30, 2014.  Management continually reviews and adjusts its reserve estimates to reflect its loss experience and any new information that becomes available.  Adjustments resulting from such reviews may be significant.

A summary of the Company’s loss reserves, broken down into its components of known title claims and IBNR, follows:
 
September 30, 2014
 
%
 
December 31, 2013
 
%
Known title claims
$
5,342,132

 
14.7
 
$
4,670,809

 
13.2
IBNR
30,909,868

 
85.3
 
30,689,191

 
86.8
Total loss reserves
$
36,252,000

 
100.0
 
$
35,360,000

 
100.0

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

Note 3 - Earnings Per Common Share and Share Awards

Basic earnings per common share is computed by dividing net income attributable to the Company by the weighted average number of common shares outstanding during the reporting period.  Diluted earnings per common share is computed by dividing net income attributable to the Company by the combination of dilutive potential common stock, comprised of shares issuable under the Company’s share-based compensation plans and the weighted average number of common shares outstanding during the reporting period.  Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method.  Under the treasury stock method, when share-based awards are exercised, (a) the exercise price of a share-based award; (b) the amount of compensation cost, if any, for future services that the Company has not yet recognized; and (c) the amount of estimated tax benefits that would be recorded in retained earnings, if any, are assumed to be used to repurchase shares in the current period.  The number of incremental dilutive potential common shares, calculated using the treasury stock method, was 3,826 and 5,859 for the three months ended September 30, 2014 and 2013, respectively, and 5,238 and 24,334 for the nine months ended September 30, 2014 and 2013, respectively.


8



The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Net income attributable to the Company
$
2,594,490

 
$
5,515,798

 
$
6,954,526

 
$
12,898,203

Weighted average common shares outstanding – Basic
2,028,818

 
2,069,081

 
2,033,637

 
2,059,226

Incremental shares outstanding assuming the exercise of dilutive stock options and SARs (share-settled)
3,826

 
5,859

 
5,238

 
24,334

Weighted average common shares outstanding – Diluted
2,032,644

 
2,074,940

 
2,038,875

 
2,083,560

Basic earnings per common share
$
1.28

 
$
2.67

 
$
3.42

 
$
6.26

Diluted earnings per common share
$
1.28

 
$
2.66

 
$
3.41

 
$
6.19


There were 3,000 potential shares excluded from the computation of diluted earnings per share for the three months ended September 30, 2014. There were no potential shares excluded from the computation of diluted earnings per share for the three months ended September 30, 2013. There were no potential shares excluded from the computation of diluted earnings per share for the nine months ended September 30, 2014. There were 3,000 potential shares excluded from the computation of diluted earnings per share for the nine months ended September 30, 2013. These potential shares were anti-dilutive because the underlying share awards were out-of-the-money.
 
The Company has adopted employee stock award plans under which restricted stock, and options or SARs to acquire shares (not to exceed 500,000 shares) of the Company's stock, may be granted to key employees or directors of the Company at a price not less than the market value on the date of grant.  SARs and options (which have predominantly been incentive stock options) awarded under the plans thus far generally expire in five to ten years from the date of grant and are exercisable and vest: immediately; within one year; or at 10% to 20% per year beginning on the date of grant.  All SARs issued to date have been share-settled only.

A summary of share-based award transactions for all share-based award plans follows:
 
Number
Of Shares
 
Weighted
Average
Exercise
Price
 
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
Outstanding as of January 1, 2013
98,150

 
$
30.74

 
3.17
 
$
2,871,710

SARs granted
3,000

 
71.59

 
 
 
 

SARs exercised
(79,500
)
 
28.77

 
 
 
 

Options exercised
(2,650
)
 
28.63

 
 
 
 

Options/SARs canceled/forfeited/expired

 

 
 
 
 

Outstanding as of December 31, 2013
19,000

 
$
45.74

 
3.43
 
$
669,610

SARs granted
4,500

 
68.70

 
 
 
 

SARs exercised
(1,500
)
 
49.04

 
 
 
 

Options exercised
(1,000
)
 
27.21

 
 
 
 

Options/SARs canceled/forfeited/expired

 

 
 
 
 

Outstanding as of September 30, 2014
21,000

 
$
51.30

 
3.90
 
$
459,810

 
 
 
 
 
 
 
 
Exercisable as of September 30, 2014
18,750

 
$
49.22

 
3.57
 
$
449,685

 
 
 
 
 
 
 
 
Unvested as of September 30, 2014
2,250

 
$
68.70

 
6.64
 
$
10,125



9



During the second quarters of both 2014 and 2013, the Company issued a total of 3,000 share-settled SARs to the directors of the Company.  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 values for the SARs issued during 2014 and 2013 were $28.98 and $27.55, respectively.

The weighted average fair values for SARs issued during 2014 and 2013 were estimated using the weighted average assumptions shown in the table below:
 
2014
 
2013
Expected life in years
6.9

 
5.0

Volatility
39.9
%
 
44.6
%
Interest rate
2.1
%
 
1.3
%
Yield rate
0.4
%
 
0.5
%

There was approximately $88,000 and $62,000 of compensation expense relating to SARs or options vesting on or before September 30, 2014 and 2013, respectively, included in salaries, employee benefits and payroll taxes in the Consolidated Statements of Income. As of September 30, 2014, there was approximately $65,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s stock award plans. That cost is expected to be recognized over a weighted average period of approximately 5 months.

There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.

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 September 30, 2014 and 2013:
Three Months Ended September 30, 2014
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
27,381,759

 
$
1,517,927

 
$
(465,140
)
 
$
28,434,546

Investment income
956,894

 
131,435

 
(23,334
)
 
1,064,995

Net realized gain on investments
5,781

 
2,908

 

 
8,689

Total revenues
$
28,344,434

 
$
1,652,270

 
$
(488,474
)
 
$
29,508,230

Operating expenses
24,940,774

 
1,416,685

 
(447,719
)
 
25,909,740

Income before income taxes
$
3,403,660

 
$
235,585

 
$
(40,755
)
 
$
3,598,490

Total assets
$
152,813,417

 
$
42,681,883

 
$

 
$
195,495,300

Three Months Ended September 30, 2013
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
31,343,108

 
$
1,396,309

 
$
(386,454
)
 
$
32,352,963

Investment income
919,819

 
93,854

 
(23,335
)
 
990,338

Net realized gain on investments
250,600

 
11,338

 

 
261,938

Total revenues
$
32,513,527

 
$
1,501,501

 
$
(409,789
)
 
$
33,605,239

Operating expenses
24,212,255

 
1,485,494

 
(369,033
)
 
25,328,716

Income before income taxes
$
8,301,272

 
$
16,007

 
$
(40,756
)
 
$
8,276,523

Total assets
$
151,795,001

 
$
37,362,629

 
$

 
$
189,157,630


10



Nine Months Ended September 30, 2014
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
84,257,427


$
4,418,659


$
(1,215,983
)

$
87,460,103

Investment income
2,823,098


377,750


(70,002
)

3,130,846

Net realized gain on investments
536,309


56,599




592,908

Total revenues
$
87,616,834


$
4,853,008


$
(1,285,985
)

$
91,183,857

Operating expenses
78,256,239


4,457,289


(1,163,720
)

81,549,808

Income before income taxes
$
9,360,595


$
395,719


$
(122,265
)

$
9,634,049

Total assets
$
152,813,417


$
42,681,883


$


$
195,495,300

Nine Months Ended September 30, 2013
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
88,063,272

 
$
4,004,766

 
$
(1,090,550
)
 
$
90,977,488

Investment income
2,626,642

 
279,231

 
(70,003
)
 
2,835,870

Net realized gain (loss) on investments
341,674

 
(8,120
)
 

 
333,554

Total revenues
$
91,031,588

 
$
4,275,877

 
$
(1,160,553
)
 
$
94,146,912

Operating expenses
71,657,966

 
4,629,241

 
(1,038,286
)
 
75,248,921

Income (loss) before income taxes
$
19,373,622

 
$
(353,364
)
 
$
(122,267
)
 
$
18,897,991

Total assets
$
151,795,001

 
$
37,362,629

 
$

 
$
189,157,630


Note 5 – Retirement Agreements and Other Postretirement Benefits

The Company’s subsidiary, Investors Title Insurance Company ("ITIC"), is 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 $7,001,000 and $6,580,000 as of September 30, 2014 and December 31, 2013, respectively.  The executive employee benefits include health insurance, 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 benefits cost for the executive benefits for the periods ended September 30, 2014 and 2013:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Service cost – benefits earned during the year
$
3,666

 
$
3,946

 
$
11,000

 
$
11,837

Interest cost on the projected benefit obligation
7,618

 
7,103

 
22,854

 
21,309

Amortization (accretion) of unrecognized prior service cost
554

 
(380
)
 
1,663

 
(1,139
)
Amortization of unrecognized losses

 
1,573

 

 
4,720

Net periodic benefits costs
$
11,838

 
$
12,242

 
$
35,517

 
$
36,727


Note 6 - Fair Value Measurement
 
Valuation of Financial Assets and Liabilities
 
The FASB has established a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value of financial assets and liabilities, such as securities.  This hierarchy categorizes the inputs into three broad levels as follows.  Level 1 inputs to the valuation methodology are quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 2 inputs to the valuation methodology 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.


11



Debt and Equity Securities

The Level 1 category includes equity securities that are measured at fair value using quoted active market prices.

The Level 2 category includes fixed maturity investments such as corporate bonds, U.S. government and agency bonds and municipal bonds.  Fair value is principally based on market values obtained from a third party pricing service.  Factors that are used in determining 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 September 30, 2014 and December 31, 2013, the Company did not adjust any Level 2 fair values.

A number of the Company’s investment grade corporate bonds are frequently traded in active markets, and trading prices are consequently available for these securities.  However, these securities were classified as Level 2 because the pricing service from which the Company has obtained fair values for these instruments uses valuation models which use observable market inputs in addition to traded 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.

The Level 3 category only includes the Company’s investments in student loan auction rate securities (“ARS”) because quoted prices were unavailable due to the failure of auctions.  The Company’s ARS portfolio is comprised entirely of investment grade student loan ARS. The par value of these securities was $1,000,000 as of September 30, 2014 and December 31, 2013,  with approximately 97.0% as of September 30, 2014 and December 31, 2013, guaranteed by the U.S. Department of Education.

Some of the inputs to ARS valuation are unobservable in the market and are significant – therefore, the Company utilizes another third party pricing service to assist in the determination of the fair market value of these securities.  This service uses a proprietary valuation model that considers factors such as the following: the financial standing of the issuer; reported prices and the extent of public trading in similar financial instruments of the issuer or comparable companies; the ability of the issuer to obtain required financing; changes in the economic conditions affecting the issuer; pricing by other dealers in similar securities; time to maturity; and interest rates.  The following table summarizes some key assumptions the service used to determine fair value as of September 30, 2014 and December 31, 2013:
 
2014
 
2013
Cumulative probability of earning maximum rate until maturity
—%
 
—%
Cumulative probability of principal returned prior to maturity
95.3%
 
95.6%
Cumulative probability of default at some future point
4.7%
 
4.4%

Significant increases or decreases in any of the inputs in isolation could result in significant changes to the fair value measurement.  Generally, increases in default probabilities and liquidity risk premiums lower the fair market value while increases in principal being returned and earning maximum rates increase fair market values.

Based upon these inputs and assumptions, the pricing service provides a range of values to the Company for its ARS.  The Company records the fair value based on the midpoint of the range and believes that this valuation is the most reasonable estimate of fair value.  In 2014 and 2013, the difference in the low and high values of the ranges was between approximately zero and four percent of the carrying value of the Company’s ARS.

The following table presents, by level, the financial assets carried at fair value measured on a recurring basis as of September 30, 2014 and December 31, 2013.  The table does not include cash on hand and also does not include assets which are measured at historical cost or any basis other than fair value.  Level 3 assets are comprised solely of ARS.


12



As of September 30, 2014
Level 1
 
Level 2
 
Level 3
 
Total
Short-term Investments
$
6,154,749

 
$

 
$

 
$
6,154,749

Equity Securities
 

 
 

 
 

 
 

Common stock and nonredeemable preferred stock
37,461,674

 

 

 
37,461,674

Fixed Maturities
 

 
 

 
 

 
 

Obligations of states and political subdivisions*

 
73,611,895

 

 
73,611,895

Corporate debt securities*

 
20,449,843

 
933,400

 
21,383,243

Total
$
43,616,423

 
$
94,061,738

 
$
933,400

 
$
138,611,561

As of December 31, 2013
Level 1
 
Level 2
 
Level 3
 
Total
Short-term Investments
$
7,926,373

 
$

 
$

 
$
7,926,373

Equity Securities
 
 
 
 
 
 
 
Common stock and nonredeemable preferred stock
36,144,065

 

 

 
36,144,065

Fixed Maturities
 
 
 
 
 
 
 
Obligations of states and political subdivisions*

 
72,091,721

 

 
72,091,721

Corporate debt securities*

 
18,417,992

 
935,700

 
19,353,692

Total
$
44,070,438

 
$
90,509,713

 
$
935,700

 
$
135,515,851


*Denotes fair market value obtained from pricing services.

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

To help ensure that fair value determinations are consistent with ASC 820 fair value measurements, prices from our pricing services go through multiple review processes.  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 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 fair values consistent with ASC 820.

Other Financial Instruments

The Company uses various financial instruments in the normal course of its business. In the measurement of the 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.
 
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.
 
Cost-basis investments
 
The estimated fair value of cost-basis investments is calculated from the book value of the underlying entities, which is not materially different from the fair market value of the underlying entity. These items are included in other investments in the Consolidated Balance Sheets.
 

13



Accrued dividends and interest
 
The carrying amount for accrued dividends and interest is a reasonable estimate of fair value due to the short-term maturity of these assets.
 
Contingent consideration
 
The fair value of contingent consideration was estimated based on the discounted value of future cash flows.  Contingent consideration consists of additional monies the Company may become obligated to pay based on the future performance of a business the Company acquired, as discussed in Note 10. This item is included in accounts payable and accrued liabilities in the Consolidated Balance Sheets.
 
The carrying amounts and fair values of these financial instruments (please note investments are disclosed in a previous table) as of September 30, 2014 and December 31, 2013 are presented in the following table:
As of September 30, 2014
Carrying Value
 
Estimated Fair
Value
 
Level 1
 
Level 2
 
Level 3
Financial Assets
 
 
 
 
 
 
 
 
 
Cash
$
23,622,522

 
$
23,622,522

 
$
23,622,522

 
$

 
$

Cost-basis investments
2,472,639

 
2,639,778

 

 

 
2,639,778

Accrued dividends and interest
1,151,250

 
1,151,250

 
1,151,250

 

 

Total Financial Assets
$
27,246,411

 
$
27,413,550

 
$
24,773,772

 
$

 
$
2,639,778

As of December 31, 2013
Carrying Value
 
Estimated Fair
Value
 
Level 1
 
Level 2
 
Level 3
Financial Assets
 
 
 
 
 
 
 
 
 
Cash
$
23,626,761

 
$
23,626,761

 
$
23,626,761

 
$

 
$

Cost-basis investments
1,927,429

 
2,069,302

 

 

 
2,069,302

Accrued dividends and interest
1,006,698

 
1,006,698

 
1,006,698

 

 

Total Financial Assets
$
26,560,888

 
$
26,702,761

 
$
24,633,459

 
$

 
$
2,069,302

Financial Liabilities
 

 
 

 
 

 
 

 
 

Contingent consideration
$
341,250

 
$
341,250

 
$

 
$

 
$
341,250

Total Financial Liabilities
$
341,250

 
$
341,250

 
$

 
$

 
$
341,250

 
The following table presents a reconciliation of the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3), which are all ARS securities, for the period ended September 30, 2014 and the year ended December 31, 2013:
Changes in fair value during the period ended:
2014
 
2013
Beginning balance at January 1
$
935,700

 
$
932,200

Redemptions and sales

 

Realized gain – included in net realized gain on investments

 

Unrealized (loss) gain - included in other comprehensive income
(2,300
)
 
3,500

Ending balance, net
$
933,400

 
$
935,700


The following table presents a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3), consisting solely of contingent acquisition consideration, for the period ended September 30, 2014 and the year ended December 31, 2013:
Changes in fair value during the period ended:
2014
 
2013
Beginning balance at January 1
$
341,250

 
$
691,250

Addition of contingent consideration

 

Payment for contingent consideration
(341,250
)
 
(350,000
)
Ending balance, net
$

 
$
341,250


14



 
Certain cost method investments are measured at estimated fair value on a non-recurring basis, such as investments that are determined to be other-than temporarily impaired during the period and recorded at estimated fair value in the Consolidated Financial Statements as of September 30, 2014 and December 31, 2013. The following table summarizes the corresponding estimated fair value hierarchy of such investments at September 30, 2014 and December 31, 2013 and the related impairments recognized:
As of September 30, 2014
Valuation
Method
 
Impaired
 
Level 1
 
Level 2
 
Level 3
 
Total at
Estimated
Fair
Value
 
Impairment
Losses
Cost method investments
Fair Value
 
Yes
 
$

 
$

 
$
22,682

 
$
22,682

 
$
(10,062
)
Total cost method investments
 
 
 
 
$

 
$

 
$
22,682

 
$
22,682

 
$
(10,062
)
As of December 31, 2013
Valuation
Method
 
Impaired
 
Level 1
 
Level 2
 
Level 3
 
Total at
Estimated
Fair
Value
 
Impairment
Losses
Cost method investments
Fair Value
 
Yes
 
$

 
$

 
$
32,744

 
$
32,744

 
$
(34,070
)
Total cost method investments
 
 
 
 
$

 
$

 
$
32,744

 
$
32,744

 
$
(34,070
)

Note 7 – Investments in Securities

The aggregate estimated fair value, gross unrealized holding gains, gross unrealized holding losses and cost or amortized cost for securities by major security type are as follows:
As of September 30, 2014
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Fixed maturities, available-for-sale, at fair value –
 
 
 
 
 
 
 
General obligations of U.S. states, territories and political subdivisions
$
32,951,738

 
$
1,712,365

 
$
9,432

 
$
34,654,671

Special revenue obligations of U.S. states, territories and political subdivisions
36,825,975

 
2,198,181

 
66,932

 
38,957,224

Corporate debt securities
19,667,522

 
828,301

 
45,980

 
20,449,843

Auction rate securities
921,510

 
11,890

 

 
933,400

Total
$
90,366,745

 
$
4,750,737

 
$
122,344

 
$
94,995,138

Equity securities, available-for-sale, at fair value –
 

 
 

 
 

 
 

Common stocks and nonredeemable preferred stocks
$
23,498,121

 
$
14,093,549

 
$
129,996

 
$
37,461,674

Total
$
23,498,121

 
$
14,093,549

 
$
129,996

 
$
37,461,674

Short-term investments –
 

 
 

 
 

 
 

Certificates of deposit and other
$
6,154,749

 
$

 
$

 
$
6,154,749

Total
$
6,154,749

 
$

 
$

 
$
6,154,749


15



As of December 31, 2013
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Fixed maturities, available-for-sale, at fair value –
 
 
 
 
 
 
 
General obligations of U.S. states, territories and political subdivisions
$
38,449,309

 
$
1,922,862

 
$
184,351

 
$
40,187,820

Special revenue obligations of U.S. states, territories and political subdivisions
30,874,571

 
1,234,130

 
204,800

 
31,903,901

Corporate debt securities
17,736,608

 
789,840

 
108,456

 
18,417,992

Auction rate securities
919,672

 
16,028

 

 
935,700

Total
$
87,980,160

 
$
3,962,860

 
$
497,607

 
$
91,445,413

Equity securities, available-for-sale, at fair value –
 

 
 

 
 

 
 

Common stocks and nonredeemable preferred stocks
$
22,200,369

 
$
14,052,780

 
$
109,084

 
$
36,144,065

Total
$
22,200,369

 
$
14,052,780

 
$
109,084

 
$
36,144,065

Short-term investments –
 

 
 

 
 

 
 

Certificates of deposit and other
$
7,926,373

 
$

 
$

 
$
7,926,373

Total
$
7,926,373

 
$

 
$

 
$
7,926,373


The special revenue category for both periods presented includes at least 30 individual bonds with revenue sources from a variety of industry sectors.

The scheduled maturities of fixed maturity securities at September 30, 2014 were as follows:
 
Available-for-Sale
 
Amortized
Cost
 
Fair
Value
Due in one year or less
$
14,547,375

 
$
14,803,090

Due after one year through five years
44,788,571

 
47,138,500

Due five years through ten years
29,035,883

 
30,523,431

Due after ten years
1,994,916

 
2,530,117

Total
$
90,366,745

 
$
94,995,138


Realized gains and losses on investments for the nine months ended September 30 are summarized as follows:
 
2014
 
2013
Gross realized gains:
 

 
 

Corporate debt securities
$
4,286

 
$

Common stocks and nonredeemable preferred stocks
1,013,931

 
365,922

Total
$
1,018,217

 
$
365,922

Gross realized losses:
 

 
 

Common stocks and nonredeemable preferred stocks
$
(178,047
)
 
$
(21,106
)
Total
$
(178,047
)
 
$
(21,106
)
Net realized gain from securities
$
840,170

 
$
344,816

Net realized (losses) gains on other investments:
 
 
 
Impairments of other investments
$
(10,062
)
 
$
(34,070
)
Gains on other investments
26,234

 
25,308

Losses on other investments
(263,434
)
 
(2,500
)
Total
$
(247,262
)
 
$
(11,262
)
Net realized gain on investments
$
592,908

 
$
333,554


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


16



The following table presents the gross unrealized losses on investment securities and the fair value of the securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at September 30, 2014 and December 31, 2013:
 
Less than 12 Months
 
12 Months or Longer
 
Total
As of September 30, 2014
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
General obligations of U.S. states, territories and political subdivisions
$
922,479

 
$
(682
)
 
$
1,116,489

 
$
(8,750
)
 
$
2,038,968

 
$
(9,432
)
Special revenue obligations of U.S. states, territories and political subdivisions
2,283,793

 
(7,168
)
 
1,169,553

 
(59,764
)
 
3,453,346

 
(66,932
)
Corporate debt securities
4,450,175

 
(45,980
)
 

 

 
4,450,175

 
(45,980
)
Total fixed income securities
$
7,656,447

 
$
(53,830
)
 
$
2,286,042

 
$
(68,514
)
 
$
9,942,489

 
$
(122,344
)
Equity securities
$
1,295,803

 
$
(99,394
)
 
$
138,240

 
$
(30,602
)
 
$
1,434,043

 
$
(129,996
)
Total temporarily impaired securities
$
8,952,250

 
$
(153,224
)
 
$
2,424,282

 
$
(99,116
)
 
$
11,376,532

 
$
(252,340
)
 
Less than 12 Months
 
12 Months or Longer
 
Total
As of December 31, 2013
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
General obligations of U.S. states, territories and political subdivisions
$
4,198,012

 
$
(184,351
)
 
$

 
$

 
$
4,198,012

 
$