Investors Title Company today announced its results for the fourth quarter and year ended December 31, 2010. For the quarter, net income increased to $2,368,550, or $1.04 per diluted share, compared with $309,300, or $0.14 per diluted share, for the prior year period. For the year, net income increased 32.0% to $6,372,626, or $2.78 per diluted share, compared with $4,828,779, or $2.10 per diluted share, for the prior year.
The increase in net income for the quarter was driven primarily by revenue growth and favorable claims experience. Higher levels of refinance activity led to a 53.7% increase in net premiums written. Operating expenses increased 28.9% to $18,641,944 versus the prior year period, primarily due to a 73.2% increase in commissions, commensurate with the increase in premium volumes and a greater contribution from agency business. The increase in commission expense was partially offset by lower claims expense. Despite the increase in premium volume, the provision for claims decreased 31.2% versus the prior year period due to a recovery of approximately $600,000 as well as favorable claims experience related to prior policy years.
The increase in net income for the year is due to reductions in claims expense and other operating expenses, as well as realized gains on investments, partially offset by a higher effective income tax rate compared with 2009. While total revenues were flat versus 2009, operating expenses decreased 4.1% to $62,693,729. The higher effective income tax rate is attributable to a change in the mix of tax-exempt investment income relative to the prior year.
Chairman J. Allen Fine added, “We are pleased to report a substantial improvement in operating results for 2010. Net premiums written in the second half of the year increased 41.7% over the first half from an increase in refinance activity as well as contributions from new agents. Operating expenses were favorable compared with the prior year due to continued improvement in our claims loss rate as well as reductions in other operating expense categories. Our balance sheet and financial condition remain very strong, and we continue to enhance our competitive strengths and market position by emphasizing operational efficiency and the expansion of our agency base.”