Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. INVESTORS TITLE CO (720858) 10-K published on Mar 11, 2020 at 4:14 pm
Reporting Period: Dec 30, 2019
Personnel Expenses: Personnel expenses include base salaries, benefits and payroll taxes, bonuses paid to employees and contract labor expenses. Personnel expenses were $46.1 million, $43.6 million and $39.9 million for 2019, 2018 and 2017, respectively. Personnel expenses increased by approximately 5.8% in 2019, from 2018, and 9.1% in 2018, from 2017. The increases in 2019, compared with 2018, and 2018, compared with 2017, were 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. On a consolidated basis, personnel expenses as a percentage of total revenues were 25.1%, 27.9%, and 24.7% in 2019, 2018 and 2017, respectively.
Provision (Benefit) for Claims: The provision (benefit) for claims as a percentage of net premiums written was 2.4%, (0.2)% and 2.4% in 2019, 2018 and 2017, respectively. The increase in the provision (benefit) for claims in 2019, compared with 2018, was due to less favorable loss development and higher incurred claims in the current year period. A benefit for claims was recorded in 2018, primarily due to favorable loss experience, which resulted in the decrease in the provision (benefit) for claims in 2018, compared with 2017.
The provision for income taxes was $8.4 million, $5.2 million and $4.6 million for 2019, 2018 and 2017, respectively. Income tax expense as a percentage of earnings before income taxes was 21.0%, 19.2% and 15.1% for 2019, 2018 and 2017, respectively. The U.S. federal statutory tax rate for 2019 and 2018 was 21%, and 35% for 2017. On December 22, 2017, the TCJA, was enacted into law. That legislation, among other changes, reduced the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. As required under generally accepted accounting principles, the Company’s deferred tax assets and liabilities were revalued at the newly enacted U.S. corporate income tax rate, and the impact was recognized in the provision for income taxes in the fourth quarter of 2017. The revaluation resulted in a benefit of approximately $5.3 million recorded for the year ended December 31, 2017.
Cash Flows: Net cash flows provided by operating activities were $20.9 million, $24.4 million and $19.9 million for 2019, 2018 and 2017, respectively. Cash flows from operating activities decreased in 2019, from 2018, primarily due to net income declining when adjusted for non-cash items, such as changes in the estimated fair value of equity security investments, and the timing of income tax disbursements, partially offset by an increase in the provision for claims, net of payments of claims. Cash flows from operating activities increased in 2018, from 2017, primarily due to the timing of tax payments and changes in the estimated fair value of equity security investments, partially offset by a lower net income and a benefit for claims.
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.