Investors Title Company Annual Report 2011

← All annual reports

FY2011 Annual Report · Investors Title Company

Loading PDF…

Going the Distance

121 North Columbia Street (27514) | P.O. Drawer 2687 Chapel Hill, North Carolina 27515-2687

919.968.2200 | FAX: 919.968.2227

www.invtitle.com

2011 Annual Report

228979_C&C_Investorstitle_CVR.indd 1-3

4/9/12 4:58 PM

From left to right: J. Allen Fine, Chairman, W. Morris Fine, Executive
Vice President, and James A. Fine, Jr., President.

121 North Columbia Street (27514) | P.O. Drawer 2687 | Chapel Hill, North Carolina 27515-2687

Corporate Headquarters

919.968.2200 | FAX: 919.968.2227

As we enter our fortieth year of
operations, we remain confident
in our fundamental approach.

To Our Shareholders:

In 2011, mortgage lending volume declined 19.7% and is now less than half the level it was

five years ago. Although interest rates nudged downward slightly and housing affordability

remained high, both purchase and refinance lending declined. Despite these unfavorable

market trends, we increased revenue and net income.

For the twelve-month period ended December 31, 2011, the Company reported total revenues

of $90.7 million, an increase of 27.2% from 2010. Net income increased 8.8% from 2010

to $6.9 million, and diluted earnings per share of $3.20 represented an increase of 15.1%

from 2010. Net profit margin was 7.6%.

Operational

Licensed

Annual Meeting

May 16, 2012, 11:00 a.m.

The Siena Hotel

1505 East Franklin Street

Chapel Hill, North Carolina 27514

Investor Information

Additional copies of the Company’s Annual

Report on Form 10-K can be obtained at no

charge upon written request to the Corporate

Secre tary, P.O. Drawer 2687, Chapel Hill, North

Carolina 27515-2687, or by e-mail request to

investorrelations@invtitle.com.

Transfer Agent

First Shareholder Services

Institutional Advisory Services

FCC61

P.O. Box 29522

Raleigh, North Carolina 27626-0522

Investors Title Company Officers

Directors

J. Allen Fine

Chief Executive Officer

James A. Fine, Jr.

J. Allen Fine

Chairman, Chief Executive Officer

James A. Fine, Jr.

President, Chief Financial Officer, Treasurer

W. Morris Fine

Executive Vice President, Secretary

Elizabeth B. Lewter

Vice President, Assistant Secretary

L. Dawn Martin

Vice President, Assistant Secretary

David L. Francis

Private Investor

Richard M. Hutson II

Attorney-at-Law

R. Horace Johnson

Private Investor

H. Joe King, Jr.

Private Investor

James R. Morton

President

TransCarolina Corporation

James H. Speed, Jr.

President, Chief Executive Officer

North Carolina Mutual Life Insurance Company

228979_C&C_Investorstitle_CVR.indd 4-6

4/9/12 4:58 PM

Most of our revenue growth for the year came from expanding our agency base in Texas, the

second-largest title insurance market in the nation. Since entering the market in 2010, we

have worked diligently to establish our distribution network and manage the resulting growth.

Our dedicated and experienced team in Texas remains focused on expanding agent relationships.

Even as we focus on top-line growth, we remain mindful of the importance of operating

efficiently in our cyclical industry. Excluding commissions and premium taxes, which increase

as our agency network expands and premium levels increase, other operating expense

categories rose less than 1% over 2010. We have controlled expense growth over the past

few years by carefully examining all expense categories and by developing a corporate

culture that rewards good stewardship.

Although we manage our expenses carefully, we remain committed to making targeted
investments in growth opportunities and strategic technology initiatives. Technology allows

us to differentiate ourselves by

facilitating seamless integration

with our business partners

and by enhancing workflow
effi ciency. Process efficiencies

improve the value proposition

to our business partners and

enhance internal operations;

therefore, we consider continual

investments in technology

integral to the long-term

competitive positioning of

our Company.

…we will continue to capitalize
on evolving technology and
timely business opportunities
and to invest in a motivated
team of professionals…

Due to fewer reported claims and a decrease in average claim severity, claims expense fell

24.6% from 2010, sustaining the favorable trend of recent years. Expansion into markets

with historically lower loss ratios, continued settling of economic conditions, and ongoing

efforts to manage our exposure to claims risk more effectively, have caused our loss ratio

to decline in each of the past three years.

Our investment management subsidiary, Investors Trust Company, continued to grow its client

base in 2011. The Investors Trust Company team has many years of combined experience

and continues to focus on the core business strategy of catering to individuals who demand

superior customized service, a personal relationship, and seasoned investment management.

We are strongly positioned to continue growing assets under management by adding new

clients and growing existing relationships.

Looking to the future, the economic outlook remains uncertain. Many experts predict slow

economic improvement over the next few years as the U.S. economy emerges from the

recession. Job growth, a key requirement for any meaningful sustained recovery in the real

estate market, appears to be taking hold. Many forecasts indicate a gradual reduction in the

unemployment rate over the next few years, but few economists anticipate a return to full

employment in the foreseeable future. As unemployment decreases, even modestly, home

sales will likely increase; however, rising interest rates and reduction in underlying real estate

values could reduce refinance originations over the next few years.

As we enter our fortieth year of operations, we remain confident in our fundamental approach.

We intend to retain our decades-long commitment to disciplined financial management,

which has resulted in a balance sheet with more than $157 million in assets and no debt.

We will continue to forge mutually beneficial working relationships with business partners.
And finally, we will continue to capitalize on evolving technology and timely business

opportunities and to invest in a motivated team of professionals who have long been the

cornerstone of our success. We thank our employees for their hard work, our customers

and business partners for their loyalty, and our shareholders for their support, all of whom

play an essential role in the Company’s success.

J. Allen Fine
Chairman,
Chief Executive Officer

James A. Fine, Jr.
President, Chief Financial Officer,
Treasurer

W. Morris Fine
Executive Vice President,
Secretary

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2011

[ ] 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
(State or other jurisdiction of
incorporation or organization)

56-1110199
(I.R.S. Employer
Identification No.)

121 North Columbia Street
Chapel Hill, North Carolina 27514
(919) 968-2200
(Address and telephone number of principal executive office)

Securities registered pursuant to section 12(b) of the Act:
Common Stock, no par value
Rights to Purchase Series A Junior Participating Preferred Stock

Name of each exchange on which registered:
NASDAQ Global Market
NASDAQ Global Market

Securities registered pursuant to section 12(g) of the Act:
None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes [ ] No [X]

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. [X]

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 [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting
company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the common shares held by non-affiliates was $59,616,808 based on the closing sales price on the NASDAQ Global

Market on the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2011).

As of February 17, 2012, there were 2,103,501 common shares of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Investors Title Company’s definitive proxy statement for the Annual Meeting of Shareholders to be held May 16, 2012 are incorporated

by reference in Part III hereof.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, as well as information included in future filings by the Company with the Securities and
Exchange Commission and information contained in written material, press releases and oral statements issued by or on behalf of the
Company, contains, or may contain, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995 that reflect management’s current outlook for future periods. These statements may be identified by the use of words such as "plan,"
"expect," "aim," "believe," "project," "anticipate," "intend," "estimate," "should," "could" and other expressions that indicate future events
and trends. All statements that address expectations or projections about the future, including statements about the Company's strategy for
growth, product and service development, market share position, claims, expenditures, financial results and cash requirements, are forward-
looking statements. Forward-looking statements are based on certain assumptions and expectations of future events that are subject to a
number of risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such
forward-looking statements depending on a variety of factors, including, but not limited to, the following:



the level of real estate transactions, the level of mortgage origination volumes (including refinancing) and changes to the insurance
requirements of the participants in the secondary mortgage market, and the effect of these factors on the demand for title insurance;

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

compliance with government regulation and significant changes to applicable regulations or in their application by regulators;

the possible inadequacy of provisions for claims to cover actual claim losses;

the incidence of fraud-related losses;

heightened regulatory scrutiny and investigations of the title insurance industry;

unanticipated adverse changes in securities markets, including interest rates, could result in material losses on the Company's
investments;

the Company's dependence on key management personnel, the loss of whom could have a material adverse affect on the Company's
business;

the Company’s ability to develop and offer products and services that meet changing industry standards in a timely and cost-
effective manner;

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

significant competition that the Company’s operating subsidiaries face;

the Company’s business concentration in the states of Texas and North Carolina, the sources of approximately 58.8% of our title
insurance premiums written; and



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

For a description of factors that may cause actual results to differ materially from such forward-looking statements, see Item 1A,

“Risk Factors” of this Annual Report on Form 10-K.

These and other risks and uncertainties may be described from time to time in the Company's other reports and filings with the

Securities and Exchange Commission. The Company is not under any obligation (and expressly disclaims any such obligation) and does not
undertake to update or alter any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking
statements are made. You should consider the possibility that actual results may differ materially from our forward-looking statements.

INVESTORS TITLE COMPANY AND SUBSIDIARIES

TABLE OF CONTENTS

PART I
ITEM 1.

ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.

PART II
ITEM 5.

ITEM 6.
ITEM 7.

ITEM 7A.
ITEM 8.
ITEM 9.

ITEM 9A.
ITEM 9B.

PART III
ITEM 10.
ITEM 11.
ITEM 12.

ITEM 13.

ITEM 14.

4
4
BUSINESS…………………………………………………………………………………………..
9
EXECUTIVE OFFICERS OF THE COMPANY…………………………………………………...
RISK FACTORS……………………………………………………………………………….……
9
UNRESOLVED STAFF COMMENTS………………………………………………………..…… 12
PROPERTIES………………………………………………………………………………….……. 12
LEGAL PROCEEDINGS……………………………………………………………………..…….. 12
MINE SAFETY DISCLOSURES…………………………………………………………..………. 13

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
14
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES…...…………………….....
SELECTED FINANCIAL DATA…………………………………………………………………... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS……………………………………………………………………… 16
26
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK……….......
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA……………………………........ 27
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE……………………………………………………………………….. 52
CONTROLS AND PROCEDURES………………………………………………………………...
52
OTHER INFORMATION…………………………………………………………………………... 52

53
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE……………........ 53
53
EXECUTIVE COMPENSATION…………………………………………………………………..
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS…………………………………………………...
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE…………………………………………………………………………………... 53
PRINCIPAL ACCOUNTANT FEES AND SERVICES………………………………………........ 53

PART IV
ITEM 15.

54
EXHIBITS, FINANCIAL STATEMENT SCHEDULES…………………………………………... 54

SIGNATURES…………………………………………………………………………………………………….... 55
INDEX TO EXHIBITS……………………………………………………………………………………………... 56

ITEM 1.

BUSINESS

GENERAL

PART I

Investors Title Company (the "Company") is a holding company that operates through its subsidiaries and was incorporated in the
state of North Carolina in 1973. The Company became operational in 1976, when it acquired Investors Title Insurance Company ("ITIC"),
which had itself been operating since 1972, as a wholly owned subsidiary under a plan of exchange of shares of common stock. In 1983, the
Company acquired National Investors Title Insurance Company (“NITIC”), formerly Northeast Investors Title Insurance Company, which
had itself been operating since 1973, as a wholly owned subsidiary under a plan of exchange of shares of common stock. The Company's
executive offices are located at 121 North Columbia Street, Chapel Hill, North Carolina 27514 and its telephone number is (919) 968-2200.
The Company maintains a website at www.invtitle.com.

OVERVIEW OF THE BUSINESS

The Company’s primary business activity, and its only reportable operating segment, is the issuance of residential and commercial

title insurance through ITIC and NITIC. Additionally, the Company provides tax-deferred real property exchange services through its
subsidiaries, Investors Title Exchange Corporation (“ITEC”) and Investors Title Accommodation Corporation (“ITAC”); investment
management and trust services to individuals, trusts and other entities through its subsidiaries Investors Trust Company (“Investors Trust”)
and Investors Capital Management Company (“ICMC”); and management services to title insurance agencies through its subsidiary,
Investors Title Management Services (“ITMS”). See “Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations” and Note 13 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information
related to the revenues, income and assets attributable to the Company's primary operating segment.

Title Insurance

Through its two wholly owned title underwriting subsidiaries, ITIC and NITIC, the Company underwrites land title insurance for

owners and mortgagees as a primary insurer. ITIC and NITIC offer primary title insurance coverage to owners and mortgagees of real estate
and reinsurance of title insurance risks to other title insurance companies. Title insurance protects against loss or damage resulting from title
defects affecting real property. The commitments and policies are predominantly issued using standard forms approved by the American
Land Title Association (“ALTA”).

Upon a real estate closing, the seller executes a deed to the new owner. When real property is conveyed from one party to another,
occasionally there is an undisclosed defect in the title or a mistake or omission in a prior deed, will or mortgage that may give a third party a
legal claim against such property. If a claim is made against the title to real property, title insurance provides indemnification against insured
defects.

Numerous types of defects could jeopardize the property owner's or mortgagee’s interest in the property, as defined in the title

policy. Such risks include title being vested in an individual or entity other than the insured, unmarketable title, lack of a right of access to
the property, invalidity or unenforceability of the insured mortgage, or other defects, liens, or encumbrances against the property. Examples
of common types of covered risks include defects arising from prior unsatisfied mortgages, tax liens or confirmed assessments, judgments
against the property or encumbrances against the property arising through easements, restrictions or other existing covenants. Title insurance
also generally protects against deeds or mortgages with inaccurate legal descriptions that were forged or improperly acknowledged or
delivered, that were executed by spouses without the other spouse’s signature or release of marital interest or that were conveyed by minors
or incompetents.

Title Insurance Policies. There are two basic types of title insurance policies - one for the mortgage lender and one for the real

property owner. A lender often requires property owners to purchase title insurance to protect its position as a holder of a mortgage loan, but
the lender's title insurance policy does not protect the property owner. The property owner has to purchase a separate owner's title insurance
policy to protect his investment. The Company issues title insurance policies on the basis of a title report. The title report documents the
current status of title to the property.

Insured Risk on Policies in Force. Generally, the amount of the insured risk or “face amount” of insurance under a title insurance

policy is equal to the lesser of the purchase price or the fair market value of the insured property. If a claim is made against an insured
property’s title, the insurer is responsible for paying the legal costs of eliminating covered title defects and defending the insured party against
covered title defects affecting the property. The insurer may choose to pay the policy limits to the insured or, if the loss is less than policy
limits, the amount of the insured’s actual loss due to the title defect, at which time the insurer's duty to defend the claim and all other
obligations of the insurer with respect to the claim are satisfied.

At any given time, the insurer's actual risk of monetary loss under outstanding policies is only a portion of the aggregate insured risk,

or total face amount, of all policies in force. The lower risk results primarily from the reissuance of title insurance policies by other
underwriters over time when the property is subsequently conveyed or refinanced. The coverage on a lender's title insurance policy is
reduced and eventually terminated as the mortgage loan it secures is paid. An owner's policy is effective as long as the insured has an
ownership interest in the property or has liability under warranties of title. Due to the variability of these factors, the aggregate contingent
liability of a title underwriter on outstanding policies of the Company and its subsidiaries cannot be determined with any precision.

Losses and Reserves. While most other forms of insurance provide for the assumption of risk of loss arising from unforeseen events,

title insurance is based upon a process of loss avoidance. Title insurance generally serves to protect the policyholder from the risk of loss
from events that predate the issuance of the policy. Losses on policies typically occur when a title defect is not discovered during the
examination and settlement process or upon the occurrence of certain hidden risks which cannot be determined from an accurate search of
public land records. The maximum amount of liability under a title insurance policy is generally the face amount of the policy plus the cost of
defending the insured’s title against an adverse claim and any inflation protection clause associated with the policy. Reserves for claim losses
are established based upon known claims, as well as estimated losses incurred but not yet reported to the Company based upon historical
experience and other factors.

Title claims can often be complex, vary greatly in dollar amounts, are affected by economic and market conditions and may involve

uncertainties as to ultimate exposure. Therefore, reserve estimates are subject to variability. For a more complete description of the
Company’s reserves for claims, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in
this Annual Report on Form 10-K.

Title Insurance Underwriting Operations. ITIC and NITIC issue title insurance through branch operations, or through partially

owned or independent title insurance agents. The Company’s title insurance subsidiaries determine the terms and conditions upon which they
will insure title to the real property according to their underwriting standards, policies and procedures. Title insurance premiums written
reflect a one-time premium payment, with no recurring premiums.

Generally, premiums for title insurance are recorded and recognized as revenue at the closing of the related transaction, when the

earnings process is considered complete. When the policy is issued directly through a branch office, the premiums collected are retained by
the Company. When the policy is issued through a title insurance agent, the agent retains a majority of the premium as a commission. Title
insurance commissions earned by the Company's agents are recognized as expenses concurrently with premium recognition. The percentage
of the premium retained by agents varies from region to region and is sometimes regulated by the states.

For a description of the level of net premiums written by direct and agency operations, refer to “Item 7. Management's Discussion

and Analysis of Financial Condition and Results of Operations.”

Geographic Operations. ITIC was incorporated in North Carolina in 1972, and is licensed to write title insurance in 44 states and

the District of Columbia. It currently writes title insurance in 20 states and the District of Columbia, primarily in the eastern half of the
United States.

NITIC was incorporated in South Carolina in 1973, and is licensed to write title insurance in 20 states and the District of Columbia.

It currently writes title insurance as a primary insurer and as a reinsurer in the states of Texas and New York, and as a reinsurer for ITIC.

Premiums from title insurance written on properties located in Texas and North Carolina represent the largest source of revenue for

the title insurance segment. In North Carolina, ITIC primarily issues title insurance commitments and policies through branch offices. In
Texas and other states, title policies are primarily issued through issuing agents. For a description of the level of net premiums written
geographically for significant states, refer to “Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations” in this Annual Report on Form 10-K.

Each state license authorizing ITIC or NITIC to write title insurance must be renewed annually. These licenses are necessary for the

companies to operate as a title insurer in each state in which they write premiums.

Ratings. The Company’s title insurance subsidiaries are regularly assigned ratings by independent agencies designed to indicate

their financial condition and/or their claims paying ability. The rating agencies determine ratings primarily by analyzing financial data.

Reinsurance. The Company assumes and cedes reinsurance with other insurance companies in the normal course of business.

Reinsurance is a contractual arrangement whereby one insurer assumes some or all of the risk exposure written by another insurer. Ceded
reinsurance is comprised of excess of loss treaties, which protects the ceding insurer against losses over certain amounts.

In the ordinary course of business, ITIC and NITIC reinsure certain risks with other title insurers to limit their risk exposure and to

comply with state insurance regulations. They also assume reinsurance for certain risks of other title insurers for which they receive
additional income. For the last two years, revenues from reinsurance activities accounted for less than 1% of total premium volume.

Exchange Services, Investment Management and Trust Services, and Management Services

The Company’s other lines of business include services offered by wholly owned subsidiaries ITEC, ITAC, Investors Trust, ICMC,

and ITMS.

In 1988, the Company established ITEC to provide services in connection with tax-deferred exchanges of like-kind property
pursuant to Section 1031 of the Internal Revenue Code. ITEC acts as an intermediary in tax-deferred exchanges of property held for
productive use in a trade or business or for investments, and its income is derived from fees for handling exchange transactions and interest
earned on client deposits held by the Company. ITAC provides services for accomplishing reverse exchanges when taxpayers decide to
acquire replacement property before selling the relinquished property. The services provided by the Company’s exchange division, ITEC and
ITAC, are pursuant to provisions in the Internal Revenue Code. From time to time, these laws are subject to review and changes, which may
negatively affect the demand for tax-deferred exchanges in general, and consequently the revenues and profitability of the Company’s
exchange division.

Investors Trust and ICMC work together to provide investment management and trust services to individuals, companies, banks and

trusts.

ITMS offers various consulting services to provide clients with the technical expertise to start and successfully operate a title

insurance agency.

None of these subsidiaries is currently a reportable segment for which separate financial information is presented; instead, they are

collectively included and reported in the category “All Other” in the Company’s financial statements.

CYCLICALITY AND SEASONALITY

Real estate activity, home sales and mortgage lending are cyclical in nature. Title insurance premiums are closely related to the

level of real estate activity and the average price of real estate sales. The availability of funds to finance purchases directly affects real estate
sales. Other factors include mortgage interest rates, consumer confidence, economic conditions, supply and demand and family income
levels. The Company’s premiums in future periods are likely to fluctuate due to these and other factors which are beyond management’s
control.

Historically, the title insurance business tends to be seasonal as well as cyclical. Because home sales are typically strongest in
periods of favorable weather, the first calendar quarter tends to have the lowest activity levels, while the remaining spring and summer
quarters tend to be more active. Refinance activity is generally less seasonal, but it is subject to interest rate fluctuations.

Fluctuations in mortgage interest rates, as well as other economic factors, can cause cyclical shifts in real estate activity outside of
the normal pattern of seasonality. The Company anticipates that current market conditions, including the subprime lending crisis, continued
high levels of foreclosures, ongoing weakness in home sales and home prices and continued softness in commercial real estate prices, will be
the primary influences on the Company’s operations until further stabilization occurs.

MARKETING

The Company markets its title insurance services to a broad range of customers in the residential and commercial market sectors of

the real estate industry. Issuing agents are typically real estate attorneys or subsidiaries of community and regional mortgage lending
institutions, depending on local customs and regulations and the Company’s marketing strategy in a particular territory.

ITIC and NITIC strive to provide superior service to their customers and consider this an important factor in attracting and retaining

customers. Branch and corporate personnel strive to develop new business and agency relationships to increase market share while ITIC's
Commercial Services Division focuses on services provided to commercial clients.

REGULATION

Title Insurance

The Company is an insurance holding company and therefore it is subject to regulation in the states in which its insurance

subsidiaries do business. These regulations, among others, require insurance holding companies to register and file certain reports, and
require prior regulatory approval of the payment of dividends and other intercompany distributions or transfers.

Title insurance companies are extensively regulated under applicable state laws. All states have requirements for admission to do
business as an insurance company, including minimum levels of capital and surplus and establishing reserves. State regulatory authorities
monitor the stability and service of insurance companies and possess broad powers with respect to the licensing of title insurers and agents,
approving rate schedules and policy forms, financial reporting and accounting practices, reserve requirements, investments and dividend
restrictions, as well as examinations and audits of title insurers. At December 31, 2011, both ITIC and NITIC met the statutory premium
reserve requirements and the minimum capital and surplus requirements of the states in which they are licensed. A substantial portion of the
assets of the Company’s title insurance subsidiaries consists of their portfolios of investment securities. Both of these subsidiaries are
required by various state laws to maintain assets of a defined minimum quality and amount.

The Company's insurance subsidiaries are subject to examination at any time by the insurance regulators in the states where they are
licensed. These and other governmental authorities have the power to enforce state and federal laws to which the title insurance subsidiaries
are subject, including but not limited to, the Real Estate Settlement Procedures Act (“RESPA”), the primary federal regulatory guidance
covering the real estate settlement industry.

On July 22, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. This

legislation overhauled the laws governing the real estate finance industry, and created the Consumer Financial Protection Bureau (“CFPB”)
as an independent agency within the Federal Reserve Bank. The CFPB has primary regulatory and enforcement authority over most
consumer financial products and services, including the administration of RESPA. The CFPB is in the process of developing rules and forms
to harmonize the disclosures required under RESPA with the disclosures under the Truth in Lending Act.

The CFPB will also have authority to identify and address, through regulation, unfair, deceptive and abusive practices in the

mortgage industry and certain other settlement service industries. The CFPB has been given broad enforcement authority to impose civil
penalties for violations of $5,000 per day for routine violations, $25,000 per day for knowing violations and $1,000,000 per day for reckless
violations.

The CFPB may propose rules which will potentially impact the business of the Company. Further proposals to change regulations
governing insurance holding companies and the title insurance industry are often introduced in Congress, in the state legislatures and before
the various insurance regulatory agencies. The Company regularly monitors such proposals, but their likelihood and timing, and the impact
they may have on the Company and its subsidiaries cannot be determined at this time.

Any material change in the Company’s regulatory environment may have an adverse effect on its business.

Exchange Services, Investment Management and Trust Services, and Management Services

Exchange services are not federally regulated by any regulatory commission. ITEC and ITAC provide services pursuant to Internal

Revenue Service regulations providing taxpayers a safe harbor by using a qualified intermediary to structure tax-deferred exchanges of
property and using an exchange accommodation titleholder to hold property in reverse exchange transactions.

Investors Trust is regulated by the North Carolina Commissioner of Banks. ICMC and ITMS are not regulated by any federal

regulatory commission.

COMPETITION

The title insurance industry is highly competitive. The four largest title insurance companies typically maintain greater than eighty-
five percent of the market for title insurance in the United States, with smaller “regional” companies holding the balance of the market. The
number and size of competing companies varies in the respective geographic areas in which the Company conducts business. Key
competitive factors in the title insurance industry are the financial strength and size of the insurer, timeliness and quality of service, price and
expertise in certain transactions. Title insurance underwriters also compete for agents based upon service and commission levels. Some title
insurers currently have greater financial resources, larger distribution networks and more extensive computerized databases of property
records and related information than the Company. In addition, there are numerous industry-related regulations and statutes that set out
conditions and requirements to conduct business. Changes to or the removal of such regulations and statutes could result in additional

competition from alternative title insurance products or new entrants into the industry that could materially affect the Company's business
operations and financial condition.

CUSTOMERS

The Company is not dependent upon any single customer or a few customers, and the loss of any single customer would not have a

material adverse effect on the Company.

INVESTMENT POLICIES

The Company and its subsidiaries derive a substantial portion of their income from investments in federal and municipal government

securities and investment grade corporate bonds and equity securities. The Company’s investment policy is designed to maintain a high
quality portfolio and maximize income. Some state laws impose restrictions upon the types and amounts of investments that can be made by
the Company's insurance subsidiaries. The Company manages its investment portfolio via an affiliated entity. The securities in the
Company’s portfolio are subject to economic conditions and normal market risks. The Company’s equity securities at December 31, 2011
and 2010 consisted of investments in various industry groups. There were not any significant investments in banks, trust and insurance
companies at December 31, 2011. Short-term investments, which consist primarily of money market instruments and certificates of deposit
which have an original maturity of one year or less, are carried at cost, which approximates fair value due to the short duration to maturity. In
addition, at December 31, 2011 and 2010, the Company held investments that are accounted for using the equity method (see Note 1 of the
Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.)

See Note 3 of the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for the major categories of

investments, scheduled maturities, fair values of investment securities and earnings by category.

ENVIRONMENTAL MATTERS

The title insurance policies ITIC and NITIC currently issue exclude any liability for environmental risks and contamination unless

the Company issues a specific policy endorsement providing coverage for environmental liens recorded prior to the date of policy. The
Company has not experienced and does not anticipate that it or its subsidiaries will incur any significant expenses related to environmental
claims. In connection with tax-deferred exchanges of like-kind property, ITEC and ITAC may temporarily hold title to property pursuant to
an accommodation titleholder agreement. In such situations, the person or entity for which title is being held must execute an
indemnification agreement under which it agrees to indemnify ITEC or ITAC for any environmental or other claims which may arise as a
result of the arrangement.

EMPLOYEES

The Company and its subsidiaries had 187 full-time employees and 12 part-time employees as of December 31, 2011. None of the
employees are covered by any collective bargaining agreements. Management considers its relationship with its employees to be favorable.

ADDITIONAL INFORMATION

The Company’s internet address is www.invtitle.com, the contents of which are not and shall not be deemed a part of this document
or any other Securities and Exchange Commission filing. The Company makes available free of charge through its internet website its annual
reports on Form 10-K, its quarterly reports on Form 10-Q, its current reports on Form 8-K, and all amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such materials are
electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”), and also makes available the Section 16 reports
on Forms 3, 4 and 5 of its insiders no later than the end of the business day following such filings. The information is free of charge and may
be reviewed and downloaded from the website at any time. The public may read any material it has filed with the SEC at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The “Investor Relations” section of the Company’s website also includes its
code of business conduct and ethics and the charters of the Audit, Compensation and Nominating Committees of its Board of Directors.

EXECUTIVE OFFICERS OF THE COMPANY

Following is information regarding the executive officers of the Company as of February 26, 2012. Each officer is appointed at the
annual meeting of the Board of Directors to serve until the next annual meeting of the Board or until his or her respective successor has been
elected and qualified.

Name
J. Allen Fine
James A. Fine, Jr.
W. Morris Fine

Age
77
49
45

Position with Registrant

Chief Executive Officer and Chairman of the Board

President, Treasurer, Chief Financial Officer, Chief Accounting Officer and Director

Executive Vice President, Secretary and Director

J. Allen Fine has been Chief Executive Officer and Chairman of the Board of the Company since its incorporation in 1973. Mr. Fine

also served as President of the Company until May 1997. Mr. Fine is the father of James A. Fine, Jr., and W. Morris Fine.

James A. Fine, Jr. was named Vice President of the Company in 1987. In 1997, he was named President and Treasurer and
appointed as a Director of the Company. In 2002, he was appointed as Chief Financial Officer and Chief Accounting Officer. He is the son
of J. Allen Fine and the brother of W. Morris Fine.

W. Morris Fine was named Vice President of the Company in 1992. In 1993, he was named Treasurer of the Company and served
in that capacity until 1997. In 1997, he was named Executive Vice President and Secretary of the Company. In 1999, he was appointed as a
Director of the Company. W. Morris Fine is the son of J. Allen Fine and the brother of James A. Fine, Jr..

ITEM 1A. RISK FACTORS

The risk factors listed in this section and other factors noted herein could cause actual results to differ materially from those
contained in any forward-looking statements or could result in a significant or material adverse effect on the Company’s results of operations.

Adverse changes in real estate activity may negatively impact the Company’s results of operations and financial condition.

The demand for the Company’s title insurance and other real estate transaction products and services varies over time and from year
to year and is dependent upon, among other factors, the volume of commercial and residential real estate transactions and mortgage financing
and refinancing transactions. The volume of these transactions has historically been influenced by factors such as the state of the overall
economy, the average price level of real estate sales and the availability and pricing of mortgage financing. During an economic downturn,
recession or economic uncertainty, as currently exists in the United States, or when the availability of credit, including mortgage financing, is
limited or when mortgage interest rates are increasing, real estate activity typically declines. The cyclical nature of the Company’s business
has caused volatility in revenue and profitability in the past and is expected to do so in the future.

The real estate and credit markets have experienced significant volatility and disruption for more than 4 years, which has created a

difficult operating environment for the Company and other companies in the real estate industry. Property values and the transaction volume
have significantly declined since the market peak in 2005. In addition, the Company holds investments in entities which may also be
negatively impacted by these conditions. The ultimate depth and duration of the current economic instability is unknown. If the current
levels of real estate and credit market disruption and volatility continue or worsen, there can be no assurance that the Company will not
experience adverse effects, which may be material to its results of operations and financial condition.

Demand for title insurance also depends in part upon the requirement by mortgage lenders and other participants in the secondary

mortgage market that title insurance policies be obtained on residential and commercial real property.

The Company may experience material losses resulting from fraud, defalcation or misconduct.

Fraud, defalcation and other misconduct by the Company’s agents, approved attorneys and employees are risks inherent in the
Company’s business. Agents and approved attorneys typically handle large sums of money in trust pursuant to the closing of real estate
transactions and misappropriation of funds by any of these parties could result in severe title claims. During the early years of the recent
economic downturn, the Company experienced abnormally high losses for policies that were issued in 2006 and 2008 from these
factors. Continuation of challenging economic conditions or economic uncertainty could result in further abnormal loss experience from
fraud, defalcation and misconduct.

Unfavorable claims experience will adversely affect the Company’s financial results.

The Company’s net income is affected by the extent to which its actual claims experience is consistent with the assumptions used in
establishing reserves for claims. Reserves for claims are established based on actuarial estimates of how much the Company will need to pay
for reported claims, as well as claims which have been incurred but not yet reported. In addition, management considers factors such as the
Company’s historical claims experience, case reserve estimates on reported claims, large claims and other relevant factors in determining loss
provision rates and the aggregate recorded expected liability for claims. Due to the nature of the underlying risks and the high degree of
uncertainty associated with the determination of reserves for claims, the Company cannot determine precisely the amounts which it will
ultimately pay to settle its claims. Such amounts may vary from the estimated amounts, particularly when those payments may not occur
until well into the future. To the extent that actual claims experience is less favorable than the underlying assumptions used in establishing
such liabilities, the Company could be required to increase reserves. Since title claims are often complex with widely varying dollar loss
potentials, the ultimate exposure is often uncertain. Therefore, reserve estimates are subject to variability. Unfavorable economic conditions
can lead to an increase in title insurance claims due to higher levels of defaults and foreclosures upon insured properties. In addition, the
Company may experience unexpected large losses periodically which require an increase in loss reserves.

Deterioration of economic and credit markets or economic uncertainty may cause a decline in the performance of the

Company’s investments and could have a material adverse affect on net income.

The Company and its subsidiaries derive a substantial portion of their income from short-term investments and investments in

investment grade municipal and corporate bonds and equity securities. The Company’s investment policy is designed to balance the
competing objectives of asset quality and investment income. Changes in general economic conditions, interest rates, activity levels in
securities markets and other external factors could adversely affect the value of the Company’s investment portfolio and, in turn, the
Company’s operating results and financial condition. In recent years, economic and credit market conditions have adversely affected the
ability of some issuers of debt securities to repay their obligations and have affected the market values of the underlying securities. If the
carrying value of the Company’s investments exceeds the fair value, and the decline in fair value is deemed to be other-than-temporary, the
Company will be required to write down the value of its investments, which could negatively impact the Company’s results of operations and
financial condition. During the recent economic downturn, the Company has written down the value of some of its investments.

The Company relies upon North Carolina and Texas for about 58.8% of its title insurance premiums. Changes in the

economic or regulatory environments in North Carolina and Texas could have an adverse affect on the Company.

North Carolina and Texas are the largest sources of premium revenue for the title insurance subsidiaries and, in 2011, represented
approximately 58.8% of total premiums earned by the Company. A decrease in the level of real estate activity in North Carolina or Texas,
driven either by depressed economic conditions, changes in regulatory environments or other factors that could influence demand, could have
a disproportionately negative impact on the Company’s financial results.

The Company may encounter difficulties managing growth, which could adversely affect its results.

The Company’s future growth plans involve expansion into new geographic locations and further penetration in its established

markets. Expansion into new markets may subject the Company to associated risks, such as the diversion of management’s attention and
other risks related to establishing operations in new territories.

The Company’s insurance subsidiaries are subject to complex government regulations. Changes in regulations may have an

adverse affect on the Company’s results of operations.

The Company’s title insurance businesses are subject to extensive state laws and regulations which vary from state to state. These

laws and regulations are intended to protect policyholders and consumers. The nature and extent of these laws and regulations typically
involve, among other matters, licensing and renewal requirements and trade and marketing practices, including, but not limited to the
following:

●licensing of insurers and agents;
●capital and surplus requirements;
●approval of premium rates for insurance;
●limitations on types and amounts of investments;
●restrictions on the size of risks that may be insured by a single company;
●filing of annual and other reports with respect to financial condition;
●the amount of dividends and other payments made by insurance subsidiaries;
●establishing reserves;
●accounting and financing practices;
●deposits of securities for the benefit of policyholders;
●trade and marketing practices;
●regulation of insurance;
●approval of policy forms; and
●use of personal information.

The Company’s other businesses operate within state and federal guidelines. Any changes in the regulatory environment could

restrict its existing or future operations or make it more burdensome to conduct them.

Title insurance rate regulation could have an adverse affect on the Company’s results of operations.

Rates for title insurance vary by state and are subject to extensive regulation. The process of implementing a rate change in most

states involves pre-approval by the applicable state insurance regulator. This regulation could impact the Company’s ability to adjust prices
due to changing market conditions, which could adversely affect results of operations.

A downgrade or a potential downgrade from a rating agency could result in a loss of underwriting business.

The competitive positions of title insurance companies rely partly on ratings of their financial strength and claims-paying ability

issued by independent rating agencies. These ratings are periodically reviewed and may change from time to time. A significant downgrade
in the ratings of either of the Company’s policy-issuing subsidiaries could negatively impact its ability to compete for new business and retain
existing business and maintain licenses necessary to operate as title insurance companies in various states.

Competition affects the Company’s results of operations.

The title insurance industry is highly competitive. Key competitive factors in the title insurance industry are quality of service, price

within regulatory parameters, expertise, timeliness and the financial strength and size of the insurer. Title companies compete for premiums
by choosing various distribution channels which may include company-owned operations and issuing agency relationships with attorneys,
lenders, realtors, builders and other settlement service providers. Title insurance underwriters compete for agents on the basis of service and
commission levels. Some title insurers currently have greater financial resources, larger distribution networks and more extensive
computerized databases of property records and information than the Company. The number and size of competing companies varies in the
different geographic areas in which the Company operates. Competition among the major providers of title insurance or the acceptance of
new alternatives to traditional title products by the marketplace could adversely affect the Company’s operations and financial condition.

The Company’s success relies on its ability to attract and retain key personnel and agents.

Competition for skilled and experienced personnel in the Company’s industry is high. The Company may have difficulty hiring the

necessary marketing and management personnel to support any future growth. The loss of a key employee or the failure of a key employee to
perform could prevent the Company from realizing its growth potential. Also, the Company’s results of operations and financial condition
could be adversely affected if it is unsuccessful in attracting and retaining new agents.

Insurance regulations limit the ability of the Company’s insurance subsidiaries to pay dividends to the holding company.

The Company is an insurance holding company and it has no substantial operations of its own. The Company’s ability to pay
dividends and meet its obligations is dependent, among other factors, on the ability of its subsidiaries to pay dividends or repay intercompany
loans. The Company’s insurance subsidiaries are subject to regulations that limit the amount of dividends, loans or advances they can make
based on the amount of their adjusted unassigned surplus and net income and require these subsidiaries to maintain minimum amounts of
capital, surplus and reserves. As of December 31, 2011, approximately $73,216,000 of consolidated stockholders’ equity represents the net
assets of the Company’s subsidiaries that cannot be transferred in the form of dividends, loans or advances to the Company. In general,
dividends in excess of prescribed limits are deemed “extraordinary” and require prior approval by the appropriate regulatory body. These
dividend restrictions could limit the Company’s ability to pay dividends to its shareholders or fund growth opportunities.

Financial institution failures could adversely affect the Company.

The Company has substantial deposits, including deposits that are owned by third parties in financial institutions. There is no

guarantee the Company, whether through the Federal Deposit Insurance Corporation or otherwise, would recover the funds it has deposited
should one or more of the financial institutions at which the Company maintains deposits fail.

The Company may encounter difficulties managing technology changes, which could adversely affect its results.

Technology changes rapidly in the title insurance industry as a result of competitive factors and regulatory changes. Competition

and technological advancements have resulted in faster information delivery and efficient, highly automated production processes. The
inability of the Company to manage, develop and successfully implement new or existing products or services could negatively impact
profitability. Interruptions of services or unauthorized intrusions into the Company’s systems could corrupt or interfere with the transfer of
data and negatively impact the Company’s operations and financing condition.

Certain provisions of the Company’s shareholder rights plan may make a takeover of the Company difficult.

The Company has a shareholders rights plan which could discourage transactions involving actual or potential changes of control,

including transactions that otherwise could involve payment of a premium over prevailing market prices to the Company’s common
shareholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

The Company owns two adjacent office buildings and property located on the corner of North Columbia and West Rosemary streets

in Chapel Hill, North Carolina, which serve as the Company's corporate headquarters. The main building contains approximately 23,000
square feet and has on-site parking facilities. The Company's principal subsidiary, ITIC, leases office space in 30 locations throughout North
Carolina, South Carolina, Nebraska and Texas. The Company believes that each of the office facilities occupied by the Company and its
subsidiaries are in good condition, adequately insured and adequate for its present operations.

ITEM 3. LEGAL PROCEEDINGS

A class action lawsuit is pending in the United States District Court for the Southern District of West Virginia against several title
insurance companies, including Investors Title Insurance Company, entitled Backel v. Fidelity National Title Insurance et al. (6:2008-CV-
00181). The plaintiff in this case contends a lack of meaningful oversight by agencies with which title insurance rates are filed and approved.
There are further allegations that the title insurance companies have conspired to fix title insurance rates. The plaintiffs seek monetary
damages, including treble damages, as well as injunctive relief. Similar suits have been filed in other jurisdictions, several of which, have
already been dismissed. In West Virginia, the case has been placed on the inactive list pending the resolution of the bankruptcy of
LandAmerica Financial Group, Inc. The Company believes that this case is without merit, and intends to vigorously defend against the
allegations. At this stage in the litigation, the Company does not have the ability to make a reasonable range of estimates in regards to
potential loss amounts, if any.

The Company and its subsidiaries are also involved in other legal proceedings that are incidental to their business. In the Company's
opinion, based on the present status of these proceedings, any potential liability of the Company or its subsidiaries with respect to these legal
proceedings, will not, in the aggregate, be material to the Company's consolidated financial condition or operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES

Common Stock Data and Dividends

The Common Stock of the Company is traded under the symbol "ITIC" on the NASDAQ Global Market. The number of record

holders of common stock at December 31, 2011 was 367. The number of record holders is based upon the actual number of holders
registered on the books of the Company at such date and does not include holders of shares in “street name” or persons, partnerships,
associations, corporations or other entities identified in security position listings maintained by securities depositories. The following table
shows, for the periods indicated, the high and low sales prices of the Company’s Common Stock as reported on the NASDAQ Global Market,
and cash dividends declared.

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

2011

High
$ 34.38
$ 43.67
$ 39.26
$ 38.78

Low
$ 30.01
$ 29.61
$ 28.79
$ 34.40

2010

High
$ 37.67
$ 36.50
$ 33.96
$ 33.74

Low
$ 31.00
$ 31.04
$ 26.31
$ 29.02

The Company paid cash dividends of $0.07 per share in each of the four quarters in 2011 and 2010, respectively.

The Company’s current dividend policy anticipates the payment of quarterly dividends in the future. The declaration and payment

of dividends will be in the discretion of the Board of Directors and will be dependent upon the Company’s future earnings, financial
condition and capital requirements. The Company’s ability to pay dividends is also subject to certain regulatory restrictions on the payment
of dividends by its insurance subsidiaries as described in the “Liquidity and Capital Resources” section of “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” and Note 2 to the Consolidated Financial Statements included in Item 8 of
this Form 10-K.

The following table provides information about purchases by the Company (and all affiliated purchasers) during the quarter ended

December 31, 2011 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:

Issuer Purchases of Equity Securities

Period
Beginning of period
10/01/11 – 10/31/11
11/01/11 – 11/30/11
12/01/11 – 12/31/11
Total

Total Number
of Shares
Purchased

Average Price Paid
per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plan

Maximum Number of
Shares that May Yet Be
Purchased Under the
Plan

1,106
11,002
1,991
14,099

$ 35.23
36.53
36.73

$ 36.46

1,106
11,002
1,991
14,099

305,060
303,954
292,952
290,961
290,961

For the quarter ended December 31, 2011, the Company purchased an aggregate of 14,099 shares of the Company’s common stock
pursuant to the purchase plan (the “Plan”) that was publicly announced on June 5, 2000. On November 10, 2008, the Board of Directors of
the Company approved the purchase of an additional 394,582 shares pursuant to the Plan, such that there was authority remaining under the
Plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the Plan immediately after this approval.
Unless terminated earlier by resolution of the Board of Directors, the Plan will expire when all shares authorized for purchase under the Plan
have been purchased. The Company anticipates making further purchases under this Plan from time to time in the future, depending on such
factors as the prevailing market price of the Company’s common stock, the Company’s available cash and then existing alternative uses for
such cash.

ITEM 6. SELECTED FINANCIAL DATA

(dollars in thousands except per share data)
For the Year
Net premiums written
Revenues
Investment income
Net income (loss)

2011

2010

2009

2008

$ 81,529 $ 61,462 $ 62,155 $ 63,662
71,123
4,559
(1,183)

71,308
3,783
4,829

90,685
3,595
6,934

71,309
3,671
6,373

Per Share Data
$ 3.22 $ 2.79 $ 2.11 $ (0.50)
Basic earnings (loss) per common share
Weighted average shares outstanding—Basic
2,364
2,151
Diluted earnings (loss) per common share $ 3.20 $ 2.78 $ 2.10 $ (0.50)
Weighted average shares outstanding—Diluted
2,364
$ 0.28 $ 0.28 $ 0.28 $ 0.28
Cash dividends per share

2,290

2,292

2,299

2,285

2,170

$ 157,958 $ 153,485 $ 146,428 $ 139,858
115,892
89,858
39.18

125,701
106,512
50.54

129,998
103,929
45.53

123,682
97,259
42.56

2007
$ 69,984
84,942
5,197
8,402

$ 3.39
2,479
$ 3.35
2,509
$ 0.24

$ 149,642
129,026
99,276
41.17

At Year End
Assets
Investments in securities
Stockholders' equity
Book value/share

Performance Ratios
Net income (loss) to:
Average stockholders' equity
Total revenues

6.59%
7.65%

6.34%
8.94%

5.16%
6.77%

(1.25)%
(1.66)%

8.64%
9.89%

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes in this

report.

Overview

Investors Title Company (the "Company") is a holding company that engages primarily in issuing title insurance through two

subsidiaries, Investors Title Insurance Company ("ITIC") and National Investors Title Insurance Company ("NITIC"). Operating revenues
from the title segment accounted for 95.8% of the Company's operating revenues in 2011. Through ITIC and NITIC, the Company
underwrites land title insurance for owners and mortgagees as a primary insurer. Title insurance protects against loss or damage resulting
from title defects that affect real property.

There are two basic types of title insurance policies - one for the mortgage lender and one for the real estate owner. A lender often

requires property owners to purchase title insurance to protect its position as a holder of a mortgage loan, but the lender's title insurance
policy does not protect the property owner. The property owner has to purchase a separate owner's title insurance policy to protect his
investment. When real property is conveyed from one party to another, occasionally there is an undisclosed defect in the title or a mistake or
omission in a prior deed, will or mortgage that may give a third party a legal claim against such property. If a claim is made against real
property, title insurance provides indemnification against insured defects.

The Company issues title insurance policies through issuing agencies and also directly through home and branch offices. Issuing

agents are typically real estate attorneys or subsidiaries of community and regional mortgage lending institutions, depending on local customs
and regulations and the Company's marketing strategy in a particular territory. The ability to attract and retain issuing agents is a key
determinant of the Company's growth in premiums written.

Revenues for this segment result from purchases of new and existing residential and commercial real estate, refinance activity and

certain other types of mortgage lending such as home equity lines of credit.

Volume is a factor in the Company's profitability due to fixed operating costs which are incurred by the Company regardless of

premium volume. The resulting operating leverage tends to amplify the impact of changes in volume on the Company's profitability. The
Company's profitability also depends, in part, upon its ability to manage its investment portfolio to maximize investment returns and
minimize risks such as interest rate changes, defaults and impairments of assets.

The Company's volume of title insurance premiums is affected by the overall level of residential and commercial real estate activity,
which includes sales, mortgage financing and mortgage refinancing. In turn, real estate activity is affected by a number of factors, including
the availability of mortgage credit, the cost of real estate, consumer confidence, employment and family income levels and general United
States economic conditions. Interest rate volatility is also an important factor in the level of residential and commercial real estate activity.

The cyclical nature of the residential and commercial real estate markets - and consequently, the land title industry - has historically

caused fluctuations in revenues and profitability, and it is expected to continue to do so in the future. Additionally, there are seasonal
influences in real estate activity and accordingly in revenue levels for title insurers.

Services other than title insurance provided by operating divisions of the Company that are not required to be reported separately are

reported in a category called "All Other." These other services include those offered by the Company and by its smaller wholly owned
subsidiaries, Investors Title Exchange Corporation ("ITEC"), Investors Title Accommodation Corporation ("ITAC"), Investors Trust
Company ("Investors Trust"), Investors Capital Management Company ("ICMC") and Investors Title Management Services, Inc. ("ITMS").

The Company's exchange services division, ITEC and ITAC, provides customer services in connection with tax-deferred real

property exchanges. ITEC serves as a qualified intermediary in like-kind exchanges of real or personal property under Section 1031 of the
Internal Revenue Code of 1986, as amended. In its role as qualified intermediary, ITEC coordinates the exchange aspects of the real estate
transaction, and its duties include drafting standard exchange documents, holding the exchange funds between the sale of the old property and
the purchase of the new property, and accepting the formal identification of the replacement property within the required identification
period. ITAC serves as exchange accommodation titleholder in reverse exchanges. An exchange accommodation offers a vehicle for
accommodating a reverse exchange when the taxpayer must acquire replacement property before selling the relinquished property.

In conjunction with Investors Trust, ICMC provides investment management and trust services to individuals, companies, banks and

trusts. ITMS offers various consulting services to provide clients with the technical expertise to start and successfully operate a title
insurance agency.

Business Trends and Recent Conditions

By the mid 2000's, there had been a long-term trend of rising home values in the United States that resulted in inflated home values

in many areas of the country. From 2001 to 2003, the Federal Reserve lowered short-term interest rates 13 times. Home sales reached record
highs and simultaneously, lenders began to loosen their loan underwriting standards, particularly with non-traditional loan products. Lower
underwriting standards and innovative loan products increased the supply of mortgage credit and resulted in more mortgage loans to high-risk
borrowers. As a result, loan defaults and mortgage foreclosures increased. Beginning in September 2008, many financial firms failed or
restructured, contributing to a widespread financial crisis in the United States. Lenders responded to the financial crisis by implementing
stricter loan underwriting standards, which, combined with high unemployment and weakened consumer confidence, reduced the demand for
homes. In an attempt to stabilize the struggling economy, the U.S. government took steps to provide economic stimulus during 2009 and
2010. The American Recovery and Reinvestment Act of 2009 included an $8,000 tax credit available for certain first time home buyers for
the purchase of a principal residence on or after January 1, 2009. On November 6, 2009, the President signed a law which extended the first-
time homebuyer credit to persons who signed a binding purchase contract by April 30, 2010 and closed on the purchase of their residence by
September 30, 2010. A similar credit of $6,500 was also extended to homebuyers who had owned their current home at least five of the prior
eight years.

According to data published by Freddie Mac, the average 30-year fixed mortgage interest rate in the United States was 4.45% for

2011, compared with 4.69% for 2010. Despite the decline in interest rates, real estate activity in 2011 declined from prior year levels.
According to the Mortgage Bankers Association’s ("MBA’s") January 18, 2012 Mortgage Finance Forecast, 2011 annual mortgage
originations decreased 19.7% to $1,262 billion from $1,572 billion in 2010. In 2012, mortgage originations are projected to decrease 21.4%
from 2011 levels to $992 billion. Refinancing activity in 2011decreased 21.9% to $858 billion from $1,099 billion in 2010. In 2012,
refinancing activity is projected to decrease 32.1% from 2011 levels to $583 billion. Purchasing activity in 2011 decreased 14.4% to $404
billion from $472 billion in 2010. In 2012, purchasing activity is projected to increase 1.5% from 2011 levels to $410 billion.

According to the MBA’s January 18, 2012 Mortgage Finance Forecast, refinancing activity accounted for 69.9% of all mortgage

originations in 2010. In 2011, refinancing transactions were 68.0% of mortgage originations and, for 2012, are projected to be 58.8% of
mortgage originations. The projected decrease is attributable to the higher levels of refinance volume that occurred in prior years, as well as
more stringent requirements being imposed by lenders. Despite current mortgage rates falling to the lowest levels in decades, the Company
believes that many homeowners would need rates to fall even further to justify the closing costs involved with subsequent refinance
transactions. The Company believes that lender-imposed limits have factored into the decrease in refinance volume, and that many
homebuyers have too little equity in their homes to meet loan requirements or do not have the necessary credit scores to qualify for prime
mortgage rates.

Currently, the U.S. economy is showing mixed signals with several federal programs in various stages. The Federal Reserve’s

program of purchasing U.S. Treasury Bonds to reduce long-term interest rates, Quantitative Easing 2, ended in the second quarter of 2011.
In September 2011, the Federal Reserve announced “Operation Twist,” which involves selling short-term Treasury bonds in exchange for the
same amount of longer-term bonds. The intent is to push down yields on long-term bonds, noting that mortgage rates tend to track the yield
on 10-year Treasury notes. The Federal Reserve has recently announced that it will be issuing disclosures on a periodic basis that will
include projections of interest rates and when it expects to start raising interest rates. On January 25, 2012, the Federal Reserve announced
that the benchmark interest rate would remain low until at least the end of 2014. In addition, a long-term goal of 2% inflation has been set
and there is potential for a third round of U.S. Treasury Bond purchases that will be dependent upon certain economic conditions being met.
Meanwhile, federal lawmakers have agreed to extend certain provisions of the Bush-era tax cuts and negotiations are in process concerning
possible reforms of the U.S. mortgage financing system, including Fannie Mae and Freddie Mac. The MBA’s January 18, 2012 Economic
Forecast projects slight improvements in the unemployment rate, gross domestic product, the level of personal consumption and residential
investment, but also projects decreases in business investments and inventory investments for 2012. In general, the overall economy remains
uncertain with continued domestic and global concerns, which will likely result in a continuation of the sluggish real estate market for 2012.

Historically, activity in real estate markets has varied over the course of market cycles in response to evolving economic factors.

Operating results can vary from year to year based on cyclical market conditions and do not necessarily indicate the Company's future
operating results and cash flows.

Critical Accounting Estimates and Policies

This discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s
accompanying Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in
the United States. The Company's management makes various estimates and judgments when applying policies affecting the preparation of
the Consolidated Financial Statements. Actual results could differ from those estimates. Significant accounting policies of the Company are
discussed in Note 1 to the accompanying Consolidated Financial Statements. Following are those accounting estimates and policies
considered critical to the Company.

Reserves for Claim Losses:

The Company’s reserves for claims are established using estimates of amounts required to settle claims for which notice has been
received (reported) and the amount estimated to be required to satisfy incurred claims of policyholders which may be reported in the future
(incurred but not reported, or “IBNR”). The total reserve for all losses incurred but unpaid as of December 31, 2011 is represented by the
reserve for claims of approximately $37,996,000 on the accompanying Consolidated Balance Sheets. Of that total, approximately $6,234,000
was reserved for specific claims which have been reported to the Company, and approximately $31,762,000 was reserved for IBNR claims.

A provision for estimated future claims payments is recorded at the time the related policy revenue is recorded. The Company

records the claims provision as a percentage of net premiums written. This provisional rate is set to provide for losses on current year
policies. By their nature, title claims can often be complex, vary greatly in dollar amounts, vary in number due to economic and market
conditions such as an increase in mortgage foreclosures and involve uncertainties as to ultimate exposure. In addition, some claims may
require a number of years to settle and determine the final liability for indemnity and loss adjustment expense. The payment experience may
extend for more than twenty years after the issuance of a policy. Events such as fraud, defalcation and multiple property defects can
substantially and unexpectedly cause increases in estimates of losses. Due to the length of time over which claim payments are made and
regularly occurring changes in underlying economic and market conditions, these estimates are subject to variability.

Management considers factors such as the Company’s historical claims experience, case reserve estimates on reported claims, large
claims, actuarial projections and other relevant factors in determining its loss provision rates and the aggregate recorded expected liability for
claims. In establishing reserves, actuarial projections are compared with recorded reserves to evaluate the adequacy of such recorded claims
reserves and any necessary adjustments are then recorded in the current period’s income statement. As the most recent claims experience
develops and new information becomes available, the loss reserve estimate related to prior periods will change to more accurately reflect
updated and improved emerging data. The Company reflects any adjustments to reserves in the results of operations in the period in which
new information (principally claims experience) becomes available.

The Company initially reserves for each known claim based upon an assessment of specific facts and updates the reserve amount as
necessary over the course of administering each claim. Loss ratios for earlier years tend to be more reliable than recent policy years as those
years are more fully developed. In making loss estimates, management determines a loss provision rate, which it then applies to net
premiums written.

There are key assumptions that materially affect the reserve estimates. The Company assumes the aggregate reported liability for

known claims and IBNR, in the aggregate, will be comparable to its historical claims experience unless factors, such as loss experience,
change significantly. The factors the Company considered for the recently completed fiscal year did not cause any of its key assumptions to
change from assumptions used in the immediately preceding period. Also affecting the Company’s assumptions are large losses related to
fraud and defalcation, as these can cause significant variances in loss emergence patterns. Management defines a large loss as one where
incurred losses exceed $250,000. Due to the small volume of large claims, the long-tail nature of title insurance claims and the inherent
uncertainty in loss emergence patterns, large claim activity can vary significantly between policy years. The estimated development of large
claims by policy year is therefore subject to significant changes as experience develops. The Company has generally followed the same
methodology for estimating loss reserves. The loss provision rate is set to provide for losses on current year policies and to provide for
estimated positive or negative development on prior year loss estimates.

Management also considers actuarial analyses in evaluating claims reserves. The actuarial methods used to evaluate reserves are

loss development methods, expected loss methods and Cape Cod methods, all of which are accepted actuarial methods for estimating ultimate
losses and, therefore, loss reserves. In the loss development method, each policy year’s paid or incurred losses are projected to an “ultimate”
level using loss development factors. In the expected loss method, losses for each policy year are estimated based on the loss development
results for all policy years, trended to the level of the policy year being estimated. Expected loss methods produce more stable ultimate loss
estimates than do loss development methods, which are more responsive to the current loss data but can lead to volatile results. The Cape
Cod method, a special case of the Bornhuetter-Ferguson method, blends the results of the loss development and expected loss methods. For
more recent policy years, the Cape Cod method gives more weight to the results of the expected loss methods; for older policy years, more
weight is given to the loss development method results.

The key actuarial assumptions are principally loss development factors and expected loss ratios. The selected loss development

factors are based on a combination of the Company’s historical loss experience and title industry loss experience. Expected loss ratios are
estimated for each policy year based on the Company’s own experience and title industry loss ratios. When updated data is incorporated into
the actuarial models, the resulting loss development factors and expected loss ratios will likely change from the prior values. Changes in
these values from 2010 through 2011 have been the result of actual Company and industry experience during the calendar year and not
changes in assumptions.

If one or more of the variables or assumptions used changed such that the Company’s recorded loss ratio, or loss provision as a

percentage of net title premiums, increased or decreased two loss ratio percentage points, the impact on after-tax income for the year ended
December 31, 2011, would be as follows. Company management believes that using a sensitivity of two loss percentage points for the loss
ratio provides a reasonable benchmark for analysis of the calendar year loss provision of the Company based on historical loss ratios by year.

Increase in Loss Ratio of two percentage points

$(1,076,000)

Decrease in Loss Ratio of two percentage points

$ 1,076,000

Despite the variability of such estimates, management believes that, based on historical claims experience and actuarial analysis, the

Company’s reserves are adequate to cover claim losses resulting from pending and future claims for policies issued through December 31,
2011. The ultimate settlement of policy and contract claims will likely vary from the reserve estimates included in the Company’s
Consolidated Financial Statements. The Company continually reviews and adjusts its reserve estimates to reflect its loss experience and any
new information that becomes available. There are no known claims that are expected to have a materially adverse effect on the Company's
financial position or operating results.

Premiums Written and Commissions to Agents:

Generally, title insurance premiums are recognized at the time of closing of the related real estate transaction, as the earnings process
is then considered complete. Policies or commitments are issued upon receipt of final certificates or preliminary reports with respect to titles.
Title insurance commissions earned by the Company's agents are recognized as expenses concurrent with recognition of related premium
revenue.

The Company's premium revenues from certain agency operations include accruals based on estimates using historical information,
as well as other relevant trends and data. The accruals for premiums are necessary because of the lag between policy effective dates and the
reporting of these transactions to the Company by the agents. In addition to accruing these earned but unreported agency premiums, the
Company also accrues agent commission expenses, premium taxes and income taxes, and records a provision for claim losses at the
prevailing provision rate as of the balance sheet date.

Valuation and Impairment of Investments in Securities:

Securities held principally for resale in the near term are classified as trading securities and recorded at fair values. Realized and

unrealized gains and losses on trading securities are included in other income. Securities not classified as either trading securities or held-to-
maturity securities, securities for which the Company has the intent and ability to hold to maturity, are classified as available-for-sale and
reported at fair value with unrealized gains and losses, adjusted for other-than-temporary declines in fair value, reported as accumulated other
comprehensive income. As of December 31, 2011 and 2010, all of the Company’s invested securities were classified as available-for-sale.
Realized gains and losses on the sale of investments are determined using the specific identification method.

Securities are regularly evaluated and reviewed for differences between the cost and estimated fair value of each security for factors

that may indicate that a decline in fair value is other-than-temporary. When, in the opinion of management, a decline in the fair value of an
investment is considered to be other-than-temporary, such investment is written down to its fair value. Some factors considered in evaluating
whether or not a decline in fair value is other-than-temporary include, but are not limited to:

the duration and extent to which the fair value has been less than cost;


 with respect to equity securities, whether the Company’s ability and intent to retain the investment for a period of time is

sufficient to allow for a recovery in value; and

 with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be

required to sell a particular security before recovery in value.

These factors are reviewed quarterly and any material degradation in the prospect for recovery will be considered in the other-than-
temporary impairment analysis. Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline
in future periods resulting in a realized loss. The fair values of the majority of the Company’s investments are based on quoted market prices
from independent pricing services. See Note 3 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for
further information on the Company’s valuation techniques.

Deferred Taxes:

The Company recorded a net deferred tax liability at December 31, 2011 primarily related to net unrealized gains on investments
and recorded reserves for claims, net of statutory premium reserves. A net deferred tax asset was recorded at December 31, 2010 related
primarily to reserves for claims, allowance for doubtful accounts, employee benefits and other-than-temporary impairment of assets. Based
upon the Company's historical results of operations, the existing financial condition of the Company and management's assessment of all
other available information, management believes that it is more likely than not that the benefit of these assets will be realized. See Note 8 to
the Consolidated Financial Statements in this Annual Report on Form 10-K for further information on the Company’s deferred taxes.

Cyclicality and Seasonality

Title insurance premiums are closely related to the level of real estate activity and real estate values. The availability of credit

directly affects real estate sales. Home sales and mortgage lending are highly cyclical businesses. Other factors include mortgage interest
rates, consumer confidence, economic conditions, supply and demand of real estate, and family income levels. The Company’s premiums in
future periods will continue to be subject to these and other factors which are beyond management’s control and, as a result, likely to
fluctuate.

Historically, real estate transactions have produced seasonal premium levels for title insurers. Residential real estate activity has
been generally slower in the fall and winter months because fewer real estate transactions occur, while the spring and summer months are
more active. Refinance activity is generally less seasonal than purchase activity, but it is more subject to interest rate volatility and is
therefore more cyclical. However, fluctuations in mortgage interest rates, as well as other economic factors, can cause shifts in real estate
activity outside of the normal traditional seasonal pattern.

Results of Operations

Operating Revenues

Operating revenues include net premiums written plus other fee income, trust income, management services income, and exchange

services income. Investment income and realized investment gains and losses are not included in operating revenues and are discussed
separately under “Non-Operating Revenues” below. The following is a summary of the Company's operating revenues with intersegment
eliminations netted with each segment; therefore, the individual segment amounts will not agree to Note 13 in the accompanying
Consolidated Financial Statements.

Title Insurance
All Other
Total

Title Insurance

2011
$ 83,420,562
3,640,999
$ 87,061,561

2010

%
95.8% $ 63,502,167
3,481,336
4.2%

%
94.8%
5.2%
100.0% $ 66,983,503 100.0%

Net Premiums and Title Orders: Net premiums written increased 32.6% in 2011 to $81,529,333, compared with $61,462,441 in

2010. The volume of title orders decreased 1.0% in 2011 to 204,230 compared with 206,384 in 2010. The Company’s entry into Texas in
late 2010 was the primary reason for the increase in net premiums written. The increase in premium revenue is reflective of increased
business from markets with higher premium rates, primarily Texas.

Title insurance companies typically issue title insurance policies directly through branch offices or through title agencies. Following

is a breakdown of premiums generated by branch and agency operations for the years ended December 31:

Home and Branch
Agency
Total

2011
$ 16,485,973
65,043,360

%
20.2%
79.8%
$ 81,529,333 100.0%

2010
$ 17,961,144
43,501,297

%
29.2%
70.8%
$ 61,462,441 100.0%

Home and Branch Office Net Premiums: In the Company's home and branch operations, the Company issues the insurance policy
and retains the entire premium, as no commissions are paid in connection with these policies. Net premiums written from home and branch
operations decreased 8.2% to $16,485,973 in 2011 compared with $17,961,144 in 2010. The decrease in 2011 for home and branch
operations primarily reflects stagnation in the real estate market and a decline in mortgage refinancing. All of the Company's home office

operations and the majority of branch offices are located in North Carolina; as a result, the home and branch office net premiums written are
primarily for North Carolina policies.

Agency Net Premiums: When a policy is written through a title agency, agents retain the majority of the title premium collected,

with the balance remitted to the title underwriter for bearing the risk of loss in the event that a claim is made under the title insurance policy.
The increase in the percentage of total premiums written by agencies in 2011 is primarily due to the Company's strategy of growth through
expansion of its agency base and the influence of local geographic trends. Agency net premiums written increased 49.5% to $65,043,360 in
2011 compared with $43,501,297 in 2010, primarily due to the Company's entry into Texas.

Following is a schedule of net premiums written in select states where the Company’s two insurance subsidiaries ITIC and NITIC

currently underwrite title insurance:

State
Texas
North Carolina
South Carolina
Michigan
Virginia
All Others
Premiums
Reinsurance Assumed
Reinsurance Ceded

2011

2010

$ 26,321,570 $ 2,144,909
23,458,494
6,333,057
4,151,277
4,267,550
21,275,877
61,631,164
33,184
(201,907)

21,693,505
6,707,675
4,344,196
4,191,295
18,431,055
81,689,296
17,147
(177,110)

Net Premiums Written

$ 81,529,333

$ 61,462,441

Other Revenues

Other revenues primarily include other fee income, trust income, management services income, exchange services income, and

income related to the Company’s equity method investments. Other revenues were $5,532,228 and $5,521,062 for 2011 and 2010,
respectively. The increase in 2011 is related primarily to increases in trust and management services income, offset by decreases in earnings
of unconsolidated affiliates, ancillary title fees and exchange services income.

Non-operating Revenues

Investment income and realized gains and losses from investments are included in non-operating revenues.

Investment Income

The Company derives a substantial portion of its income from investments in municipal and corporate bonds and equity securities.
The Company's title insurance subsidiaries are required by statute to maintain minimum levels of investments in order to protect the interests
of policyholders. Bonds totaling approximately $6,704,000 and $6,570,000 at December 31, 2011 and 2010, respectively, are deposited with
the insurance departments of the states in which business is conducted.

In formulating its investment strategy, the Company has emphasized after-tax income. The Company’s investments are primarily in

bonds and, to a lesser extent, equity securities. The effective maturity of the majority of the bonds is within 10 years. The Company’s
invested assets are managed to fund its obligations and evaluated to ensure long term stability of capital accounts.

As the Company generates cash from operations, it is invested in accordance with the Company’s investment policy and corporate
goals. The Company’s investment policy has been designed to balance multiple goals, including the assurance of a stable source of income
from interest and dividends, the preservation of principal, and the provision of liquidity sufficient to meet insurance underwriting and other
obligations as they become payable in the future. Securities purchased may include a combination of taxable bonds, tax-exempt bonds and
equity securities. The Company strives to maintain a high quality investment portfolio. Interest and investment income levels are primarily a
function of general market performance, interest rates and the amount of cash available for investment.

Investment income was $3,595,036 in 2011 compared with $3,671,178 in 2010. The decline in investment income in 2011 was due
primarily to lower investment balances and levels of interest earned on fixed maturities and short-term funds, partially offset by higher levels
of dividends received as a result of a greater investment balance of equity securities. See Note 3 in the accompanying Consolidated Financial

Statements for the major categories of investments, scheduled maturities, amortized cost, fair values of investment securities and earnings by
security category.

Net Realized Gain (Loss) on Investments

Dispositions of equity securities at a realized gain or loss reflect such factors as industry sector allocation decisions, ongoing

assessments of issuers' business prospects and tax planning considerations. Additionally, the amounts of net realized investment gains and
losses are affected by assessments of securities' valuation for other-than-temporary impairment. As a result of the interaction of these factors
and considerations, net realized investment gains or losses can vary significantly from period to period.

Net realized gain on investments was $28,559 for 2011 compared with $654,674 for 2010. The year-to-date 2011 net gain included

impairment charges of $325,391 on certain investments and other assets, including property acquired in the settlement of claims, that were
deemed to be other-than-temporarily impaired, offset by net realized gains on the sales of investments and other assets of $353,950. The 2010
net realized gain included impairment charges of $430,241 on certain investments and other assets, including property acquired in the
settlement of claims, offset by net realized gains on the sales of investments and other assets of $1,084,915. Management believes unrealized
losses on remaining fixed income and equity securities at December 31, 2011 are temporary in nature.

The securities in the Company's portfolio are subject to economic conditions and market risks. The Company considers relevant

facts and circumstances in evaluating whether a credit or interest-related impairment of a security is other-than-temporary. Relevant facts and
circumstances include the extent and length of time the fair value of an investment has been below cost.

There are a number of risks and uncertainties inherent in the process of monitoring impairments and determining if an impairment is

other-than-temporary. These risks and uncertainties include the risk that the economic outlook will be worse than expected or have more of
an impact on the issuer than anticipated, the risk that the Company's assessment of an issuer's ability to meet all of its contractual obligations
will change based on changes in the characteristics of that issuer, the risk that information obtained by the Company or changes in other facts
and circumstances leads management to change its intent to hold the equity security until it recovers in value or its intent to sell the debt
security, and the risk that management is making decisions based on misstated information in the financial statements provided by issuers.

Expenses

The Company’s operating expenses consist primarily of commissions to agents, salaries, employee benefits and payroll taxes,

provisions for claims and office occupancy and operations. Operating expenses in 2011 increased 29.5% compared with 2010 primarily due
to increases in commissions, salaries, employee benefits and payroll taxes and premium and retaliatory taxes as a result of the increase in
premium revenues. Following is a summary of the Company's operating expenses. Intersegment eliminations have been netted; therefore, the
individual segment amounts will not agree to Note 13 in the accompanying Consolidated Financial Statements.

Title Insurance
All Other
Total

2011
$ 76,539,187
4,647,033
$81,186,220

2010

%
94.3% $ 58,028,574
4,665,155
5.7%

%
92.6%
7.4%
100.0% $ 62,693,729 100.0%

On a combined basis, the after-tax profit margins were 7.6% and 8.9% in 2011 and 2010, respectively. The decrease in profit
margin from 2010 to 2011 is primarily the result of an increase in agent business from markets with higher commission rates than our
historical market mixes. The Company continually strives to enhance its competitive strengths and market position, including ongoing
initiatives to reduce its operating expenses.

Title Insurance

Profit Margin: The Company’s title insurance after-tax profit margin varies according to a number of factors, including the volume

and type of real estate activity. Profit margins for the title insurance segment were 8.7% and 10.4% in 2011 and 2010, respectively. The
decrease in after-tax profit margin in 2011 compared with 2010 is related to an increase in agent business from markets with higher premium
and commission rates, primarily Texas.

Commissions: Agent commissions represent the portion of premiums retained by agents pursuant to the terms of their respective

agency contracts. Commissions to agents increased 59.0% from 2010 to 2011. This increase was primarily due to increased premiums from
agency operations in Texas in 2011 due to the Company’s entry into Texas in late 2010. Commission expense as a percentage of net
premiums written by agents was 76.3% and 71.7% in 2011 and 2010, respectively. The increase in the average commission rate in 2011

compared with 2010 is related to an increase in agent business from markets with higher premium and commission rates, primarily Texas.
Commission rates may vary due to geographic locations, different levels of premium rate structures and state regulations.

Provisions for Claims: The provision for claims as a percentage of net premiums written was 4.1% and 7.2% in 2011 and 2010,

respectively. The lower loss provision rate for 2011 is primarily due to favorable loss development in prior policy years, as well as a decline
in the relative share of North Carolina business relative to the total versus the prior year period. Since North Carolina’s premium rates are
less than half the national average, the resulting loss ratio for North Carolina business is higher than for our other markets.

The improvement in the loss provision rate in 2011 from the 2010 level resulted in approximately $2,541,000 less in reserves than

would have been recorded at the higher 2010 level. Loss provision ratios are subject to variability and are reviewed and adjusted as
experience develops.

Title claims are typically reported and paid within the first several years of policy issuance. The provision for claims reflects actual

payments of claims, net of recovery amounts, plus adjustments to the specific and incurred but not reported claims reserves, the latter of
which are actuarially determined based on historical claims experience. Actual payments of claims, net of recoveries, were $3,545,127 and
$5,726,366 in 2011 and 2010, respectively.

Reserves for Claims: At December 31, 2011, the total reserve for claims was $37,996,000. Of that total, approximately $6,234,000
was reserved for specific claims, and approximately $31,762,000 was reserved for claims for which the Company had no notice. Because of
the uncertainty of future claims, changes in economic conditions and the fact that many claims do not materialize for several years, reserve
estimates are subject to variability.

Changes from prior periods in the expected liability for claims reflect the uncertainty of the claims environment, as well as the
limited predictive power of historical data. The Company continually updates and refines its reserve estimates as current experience develops
and credible data emerges. Adjustments may be required as new information develops which often varies from past experience.

Movements in the reserves related to prior periods were primarily the result of changes to estimates to better reflect the latest
reported loss data, rather than as a result of material changes to underlying key actuarial assumptions or methodologies. Such changes
include payments on claims closed during the quarter, new details that emerge on still-open cases that cause claims adjusters to increase or
decrease the case reserves and the impact that these types of changes have on the Company's total loss provision.

Salaries, Employee Benefits and Payroll Taxes: Personnel costs include base salaries, benefits and bonuses paid to employees.

Salaries, employee benefits and payroll taxes were $18,552,504 and $17,695,956 for 2011 and 2010, respectively. Salaries and related costs
increased by approximately 4.8% in 2011 compared with 2010. The increase in 2011 was primarily due to increased levels of business and
higher levels of profitability driving increases in levels of variable compensation. On a consolidated basis, salaries and employee benefits as
a percentage of total revenues were 20.5% and 24.8% in 2011 and 2010, respectively.

Office Occupancy and Operations: Overall office occupancy and operations as a percentage of total revenues was 4.1% and 5.5% in

2011 and 2010, respectively. The decrease in office occupancy and operations expense in 2011 compared with 2010 was due primarily to
decreases in building and equipment rental, telecommunications expenses, depreciation and storage expenses.

Business Development: Business development expenses for 2011 increased $162,246 compared with 2010 primarily due to

increases in marketing expenses related to higher levels of marketing efforts associated with the Company’s entry into Texas.

Premium and Retaliatory Taxes: Title insurance companies are generally not subject to state income or franchise taxes. However, in

most states they are subject to premium and retaliatory taxes, as defined by statute. Premium tax rates vary from state to state; accordingly,
the total premium tax burden is dependent upon the geographical mix of operating revenues. Premium and retaliatory taxes as a percentage
of net premiums written were 2.1% in both 2011 and 2010.

Professional and Contract Labor Fees: Professional and contract labor expenses for 2011 remained virtually unchanged from 2010

and include fees associated with audit, legal, tax and labor expenses related to contract employees.

Other Expenses: Other operating expenses primarily include miscellaneous operating expenses of the trust division and other

miscellaneous expenses of the title segment. These amounts typically fluctuate with transaction volume of the title segment and the trust
division.

Income Taxes

The provision for income taxes was $2,565,000 and $2,243,000 for the years ended December 31, 2011 and 2010, respectively.
Income tax expense as a percentage of earnings before income taxes was 27.0% and 26.0%, for the years ended December 31, 2011 and
2010, respectively. The increase for 2011 from 2010 was primarily due to a higher proportion of taxable to tax-exempt investment income.
The effective income tax rate for both 2011 and 2010 was below the U.S. federal statutory income tax rate (34%), primarily due to the effect
of tax-exempt income. Tax-exempt income lowers the effective tax rate.

The Company believes it is more likely than not that the tax benefits associated with recognized, impairment and unrecognized
losses recorded through December 31, 2011 will be realized. However, this judgment could be impacted by further market fluctuations.
Information regarding the components of the income tax expense and items included in the reconciliation of the effective rate with the federal
statutory rate can be found in Note 8 to the accompanying Consolidated Financial Statements.

Net Income

The Company reported net income of $6,933,936 and $6,372,626, or $3.20 and $2.78 per share on a diluted basis in 2011 and 2010,

respectively. Total revenues for 2011 increased 27.2% to $90,685,156 from $71,309,355 while expenses for 2011 increased 29.5% to
$81,186,220 from $62,693,729. The increases in both revenues and expenses related primarily to an increase in business from markets with
higher premium and commission rates.

Liquidity and Capital Resources

Cash flows from operating activities increased from 2010 to 2011, primarily due to the pace of the collection of receivables relative

to sales, lower claim payments and the deferral of accounts payable and accrued liability payments. Cash and cash equivalents at year end
increased approximately $9,900,000 from the prior year to approximately $18,000,000, due to cash provided by operating activities in 2011.
Cash flows from operations have historically been the primary source of financing for expanding operations, additions to property and
equipment, dividends to shareholders, and operating requirements.

Cash and cash equivalents provided by or used in non-operating activities have historically been purchases and proceeds from
investing activities and repurchases of common stock and the issuance of dividends. Net cash provided by non-operating activities was
$918,068 in 2011 and net cash used by non-operating activities was $4,842,691 in 2010. Compared with 2010, 2011 had a lower level of
investment purchase activity offset by an increase in the repurchases of shares of common stock.

The net effect of all activities on total cash and cash equivalents was an increase of $9,925,227 for 2011 and a decrease of $616,190

for 2010. As of December 31, 2011, the Company held cash and cash equivalents of $18,042,258, short-term investments of $14,112,262,
fixed maturity securities of $85,407,365 and equity securities of $22,549,975.

Due to the Company’s historical ability to consistently generate positive cash flows from its consolidated operations and investment
income, management believes that funds generated from operations will enable the Company to adequately meet its current operating needs
for the foreseeable future. However, there can be no assurance that future experience will be similar to historical experience, since it is
influenced by such factors as the interest rate environment, the Company’s claims-paying ability and its financial strength ratings. The
Company is unaware of any trend that is likely to result in material adverse liquidity changes, but continually assesses its capital allocation
strategy, including decisions relating to repurchasing the Company’s stock and/or conserving cash. The Company’s current cash
requirements include general operating expenses, income taxes, capital expenditures, dividends on its common stock declared by the Board of
Directors and share repurchases of its common stock.

In addition to operational liquidity, the Company maintains a high degree of liquidity within its investment portfolio in the form of

short-term investments and other readily marketable securities.

The Company’s investment portfolio is considered as available-for-sale. The Company reviews the status of each of its securities

quarterly to determine whether an other-than-temporary impairment has occurred.

As noted previously, the Company’s operating results and cash flows are heavily dependent on the real estate market. The
Company’s business has certain fixed costs such as personnel; therefore, changes in the real estate market are monitored closely and
operating expenses such as staffing levels, are managed and adjusted accordingly. The Company believes that its significant working capital
position and management of operating expenses will aid its ability to manage cash resources through fluctuations in the real estate market.

Receipt of Dividends from Subsidiaries: The Company believes that all anticipated cash requirements for current operations will be met

from internally generated funds, through cash dividends and distributions from subsidiaries and cash generated by investment securities. The

Company’s significant sources of funds are dividends and distributions from its subsidiaries. The holding company receives cash
from its subsidiaries in the form of dividends and as reimbursements for operating and other administrative expenses that it incurs.
The reimbursements are executed within the guidelines of management agreements between the holding company and its
subsidiaries.

The Company's ability to pay dividends and operating expenses is dependent on funds received from the insurance subsidiaries,
which are subject to regulation in the states in which they do business. Each state regulates the extent to which title underwriters can pay
dividends or make distributions. As of December 31, 2011, approximately $73,216,000 of the consolidated stockholders' equity
represented net assets of the Company's subsidiaries that cannot be transferred in the form of dividends, loans or advances to the parent
company under statutory regulations without prior approval from the respective state insurance department. These regulations require prior
regulatory approval of the payment of dividends and other intercompany transfers. The Company believes, however, that amounts available
for transfer from the insurance and other subsidiaries are adequate to meet the Company's current operating needs.

The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends, which may be

constrained by regulatory and business considerations, such as the impact of dividends on surplus, which could affect an insurer’s ratings.
Further, depending on regulatory and business conditions, the Company may in the future need to retain cash in its underwriters in order to
maintain their ratings or their statutory capital position. Such requirements could be the result of adverse financial results, changes in
statutory accounting requirements by regulators, reserve charges or investment losses.

Purchase of Company Stock: On November 10, 2008, the Board of Directors of the Company approved the purchase of an

additional 394,582 shares pursuant to the Company’s stock repurchase plan, such that there was authority remaining under the plan to
purchase up to an aggregate of 500,000 shares of the Company's common stock pursuant to the plan immediately after the approval. Pursuant
to this approval, the Company purchased 182,615 shares in the twelve months ended December 31, 2011 and 12,138 shares in the twelve
months ended December 31, 2010 at an average per share price of $32.53 and $31.21, respectively.

Capital Expenditures: During 2012, the Company has plans for various capital improvement projects, including hardware purchases

and software projects that are anticipated to be funded via cash flows from operations. All material anticipated capital expenditures are
subject to periodic review and revision and may vary depending on a number of factors.

Off-Balance Sheet Arrangements

As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest money

received under real estate contracts, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title
risks. Cash held by the Company for these purposes was approximately $15,562,000 and $17,472,000 as of December 31, 2011 and 2010,
respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated
Balance Sheets. However, the Company remains contingently liable for the disposition of these deposits.

In addition, in administering tax-deferred property exchanges, ITEC serves as a qualified intermediary for exchanges, holding the net

sales proceeds from relinquished property to be used for purchase of replacement property. ITAC serves as exchange accommodation
titleholder and, through limited liability companies that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse
exchange transactions. Like-kind exchange deposits and reverse exchange property held by the Company for the purpose of completing such
transactions totaled $35,359,000 and $23,044,000 as of December 31, 2011 and 2010, respectively. These exchange deposits are held at
third-party financial institutions. These amounts are not considered assets of the Company for accounting purposes and, therefore, are
excluded from the accompanying Consolidated Balance Sheets. Exchange services revenues include earnings on these deposits; therefore,
investment income is shown as exchange services revenue, rather than investment income. The Company remains contingently liable to
customers for the transfers of property, disbursements of proceeds, and the return on the proceeds at the agreed upon rate.

External assets managed by the Investors Trust Company totaled over $600,000,000 for each of the years ended December 31, 2011

and 2010. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated
Balance Sheets.

Potential Acquisition

In January 2012, the Company executed a membership interest purchase and sale agreement under which the Company has agreed to

acquire a majority 70% ownership interest of a previously unaffiliated agency. The agreement also contains an option for the Company to
acquire the entire agency. No estimated purchase price can be calculated at this time. The membership interest purchase and sale agreement
stipulates a maximum purchase price of $1,041,250 for only the majority interest, and a minimum purchase price of $1,000,000 for the entire
agency. The actual purchase cost may deviate from both the maximum and minimum amounts. The closing, subject to the satisfaction of
certain conditions, is anticipated to be in the second quarter of 2012.

Recent Accounting Standards

In January 2010, the Financial Accounting Standards Board (“FASB”) updated the requirements for fair value measurements and

disclosures to provide for additional disclosure related to transfers in and out of fair value hierarchy Levels 1 and 2, and to require companies to
present purchases, sales, issuances and settlements of Level 3 securities on a gross rather than net basis. Refer to Note 3 for a discussion of
valuation hierarchy levels. The new disclosures are clarifications of existing disclosures and are effective for interim and annual reporting periods
beginning after December 15, 2009, except that the disclosures requiring the presentation of Level 3 securities trading activity on a gross basis are
effective for fiscal years beginning after December 15, 2010. This update did not have an impact on the Company’s financial condition or results of
operations.

Pending Accounting Standards

In May 2011, FASB updated requirements for measuring and disclosing fair value information, resulting in common principles and

requirements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and International
Financial Reporting Standards (“IFRS”). For public entities, this guidance becomes effective during interim and annual periods beginning after
December 15, 2011. Early application by public entities is not permitted. Management does not expect the adoption of this standard to have a
material impact on the Company’s Consolidated Financial Statements.

In June 2011, FASB updated requirements relating to the presentation of comprehensive income. The objectives of this accounting

update are to facilitate convergence of GAAP and IFRS, to improve the comparability, consistency and transparency of financial reporting and to
increase the prominence of items reported in other comprehensive income. The main provisions of the guidance require that all non-owner
changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive
statements. For public entities, this update becomes effective for fiscal years, and interim periods within those years, beginning after December 15,
2011. Management does not expect the adoption of this standard to have a material impact on the Company’s Consolidated Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and is not required to provide the

information required under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

1.
2.
3.
4.
5.
6.
7.
8.

Report of Independent Registered Public Accounting Firm
Management’s Report on Internal Control Over Financial Reporting
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

28
29
30
31
32
33
34
36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Investors Title Company
Chapel Hill, NC

We have audited the accompanying consolidated balance sheets of Investors Title Company and Subsidiaries as of
December 31, 2011 and 2010, and the related consolidated statements of income, comprehensive income,
stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Investors Title Company and Subsidiaries as of December 31, 2011 and 2010, and the results of
their operations and their cash flows for each of the years then ended, in conformity with accounting principles
generally accepted in the United States of America.

High Point, North Carolina
March 15, 2012

Management’s Report on Internal Control Over Financial Reporting

Management of Investors Title Company and Subsidiaries is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f) and 15(d)-15-(f). The Company’s internal control over
financial reporting has been designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the
preparation of published financial statements in accordance with generally accepted accounting principles.

The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of
management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s Consolidated Financial
Statements.

Because of its inherent limitation, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework
in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
and concluded that the Company’s internal control over financial reporting was effective as of December 31, 2011.

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of December 31,

Assets
Investments in securities

2011

2010

Fixed maturities, available-for-sale, at fair value (amortized cost: 2011: $78,783,968; 2010:
$81,784,262)

Equity securities, available-for-sale, at fair value (cost: 2011: $17,652,745; 2010: $9,458,773)
Short-term investments
Other investments

Total investments

$ 85,407,365
22,549,975
14,112,262
3,631,714

$ 86,033,557
13,872,370
27,203,550
2,888,958

125,701,316

129,998,435

Cash and cash equivalents
Premium and fees receivable (less allowance for doubtful accounts: 2011: $1,218,000; 2010:

18,042,258

8,117,031

$1,421,000)

Accrued interest and dividends
Prepaid expenses and other assets
Property, net
Deferred income taxes, net

Total Assets

Liabilities and Stockholders’ Equity
Liabilities
Reserves for claims
Accounts payable and accrued liabilities
Current income taxes payable
Deferred income taxes, net

Total liabilities

Commitments and Contingencies
Stockholders’ Equity
Class A Junior Participating preferred stock (shares authorized 100,000; no shares issued)
Common stock-no par value (shares authorized 10,000,000; 2,107,681 and 2,282,596
shares issued and outstanding 2011 and 2010, respectively, excluding 291,676 shares
for 2011 and 2010, respectively, of common stock held by the Company’s subsidiary)

Retained earnings
Accumulated other comprehensive income

Total stockholders’ equity
Total Liabilities and Stockholders’ Equity

See notes to the Consolidated Financial Statements.

6,810,000
1,108,156
2,743,517
3,553,216
-

7,253,786
1,150,602
2,816,661
3,672,317
476,534

$ 157,958,463

$ 153,485,366

$ 37,996,000
12,330,383
640,533
479,363

$ 38,198,700
10,301,495
1,056,356
-

51,446,279

49,556,551

99,003,018
7,509,165

98,240,109
5,688,705

106,512,184
$ 157,958,463

103,928,815
$ 153,485,366

Investors Title Company and Subsidiaries

Consolidated Statements of Income

For the Years Ended December 31,

Revenues
Net premiums written
Investment income - interest and dividends
Net realized gain on investments
Other

Total Revenues

Operating Expenses
Commissions to agents
Provision for claims
Salaries, employee benefits and payroll taxes
Office occupancy and operations
Business development
Filing fees, franchise and local taxes
Premium and retaliatory taxes
Professional and contract labor fees
Other
Total Operating Expenses
Income before Income Taxes
Provision for Income Taxes
Net Income

2011

2010

$ 81,529,333
3,595,036
28,559
5,532,228

$ 61,462,441
3,671,178
654,674
5,521,062

90,685,156

71,309,355

49,596,250
3,342,427
18,552,504
3,722,803
1,706,834
516,380
1,729,830
1,513,466
505,726
81,186,220
9,498,936
2,565,000
$ 6,933,936

31,189,207
4,435,066
17,695,956
3,935,563
1,544,588
573,075
1,279,400
1,511,283
529,591
62,693,729
8,615,626
2,243,000
$ 6,372,626

Basic Earnings per Common Share

$ 3.22

$ 2.79

Weighted Average Shares Outstanding – Basic

2,151,350

2,284,657

Diluted Earnings per Common Share

$ 3.20

$ 2.78

Weighted Average Shares Outstanding – Diluted

2,169,636

2,289,847

Cash Dividends Paid per Common Share

$ 0.28

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Years Ended December 31,

Net income
Other comprehensive income, before tax:
Amortization related to prior year service cost
Amortization of unrecognized (loss) gain
Accumulated postretirement (benefit) expense obligation adjustment
Unrealized gains on investments arising during the year
Reclassification adjustment for sale of securities included in net income
Reclassification adjustment for write-down of securities included in net

income

Other comprehensive income, before tax
Income tax (benefit) expense related to postretirement health benefits
Income tax expense related to unrealized gains on investments arising during

the year

Income tax benefit related to reclassification adjustment for sale of securities

included in net income

Income tax expense related to reclassification adjustment for write-down of

2011

2010

$ 6,933,936

$ 6,372,626

13,038
(318)
(115,089)
2,886,294
(353,950)

325,391

2,755,366
(34,804)

20,388
2,572
163,503
1,951,329
(1,084,915)

430,241

1,483,118
63,398

976,277

680,503

(122,594)

(351,856)

securities included in net income

Net income tax expense on other comprehensive income
Other comprehensive income

Comprehensive income

116,027

934,906
1,820,460

132,626

524,671
958,447

$ 8,754,396

$ 7,331,073

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Years Ended December 31, 2010 and 2011

Balance, January 1, 2010

Net income

Dividends ($0.28 per share)

Shares of common stock repurchased and retired

Stock options exercised

Share-based compensation expense

Amortization related to postretirement health benefits

Accumulated postretirement benefit obligation adjustment

(12,138)

9,445

Net unrealized gain on investments

Balance, December 31, 2010

Net income

Dividends ($0.28 per share)

Shares of common stock repurchased and retired

Stock options exercised

Share-based compensation expense

Amortization related to postretirement health benefits

Accumulated postretirement benefit obligation adjustment

(182,615)

7,700

Accumulated

Other

Total

Common Stock

Shares Amount

Retained

Earnings

Comprehensive

Stockholders’

Income

Equity

2,285,289

$92,528,818

$ 4,730,258

$ 97,259,077

2,282,596

$98,240,109

$ 5,688,705

$ 103,928,815

6,372,626

(639,734)

(378,770)

140,500

216,669

6,372,626

(639,734)

(378,770)

140,500

216,669

15,160

107,913

835,374

15,160

107,913

835,374

6,933,936

(599,241)

(5,940,463)

155,163

213,514

6,933,936

(599,241)

(5,940,463)

155,163

213,514

8,394

(75,959)

8,394

(75,959)

Net unrealized gain on investments

Balance, December 31, 2011

2,107,681

$99,003,018

$ 7,509,165

$ 106,512,184

1,888,025

See notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31,

2011

2010

Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
Amortization, net
Amortization related to postretirement benefits obligation
Share-based compensation expense related to stock options
Decrease in allowance for doubtful accounts on premiums receivable
Net (gain) loss on disposals of property
Net realized gain on investments
Net earnings from other investments
Provision for claims
Provision for deferred income taxes
Changes in assets and liabilities:
Decrease (increase) in receivables
Decrease (increase) in other assets
Increase in accounts payable and accrued liabilities
(Decrease) increase in current income taxes payable
Payments of claims, net of recoveries

Net cash provided by operating activities

Investing Activities
Purchases of available-for-sale securities
Purchases of short-term securities
Purchases of other investments
Proceeds from sales and maturities of available-for-sale securities
Proceeds from maturities of held-to-maturity securities
Proceeds from sales and maturities of short-term securities
Proceeds from sales and distributions of other investments
Purchases of property
Proceeds from disposals of property

Net cash provided (used in) investing activities

Financing Activities
Repurchases of common stock
Exercise of options
Dividends paid

Net cash used in financing activities

Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year

$ 6,933,936

$ 6,372,626

475,679
338,967
12,720
213,514
(203,000)
(26,528)
(28,559)
(749,688)
3,342,427
21,000

646,786
77,056
1,913,799
(415,823)
(3,545,127)

9,007,159

(15,318,418)
(1,883,562)
(853,599)
9,851,523
-
14,974,850
861,865
(361,207)
31,157

7,302,609

(5,940,463)
155,163
(599,241)

(6,384,541)

9,925,227
8,117,031

508,450
343,397
22,961
216,669
(65,000)
6,774
(654,674)
(987,632)
4,435,066
832,000

(2,018,310)
(902,187)
1,456,661
386,066
(5,726,366)

4,226,501

(16,047,885)
(10,371,686)
(560,602)
18,497,720
2,000
3,885,570
923,013
(317,530)
24,713

(3,964,687)

(378,770)
140,500
(639,734)

(878,004)

(616,190)
8,733,221

Cash and Cash Equivalents, End of Year

$ 18,042,258 $ 8,117,031

Consolidated Statements of Cash Flows, continued
For the Years Ended December 31,

Supplemental Disclosures
Cash Paid During the Year for
Income Taxes, payments, net

Non cash net unrealized gain on investments, net of deferred tax
provision of $(969,710) and $(461,281) for 2011 and 2010,
respectively
Adjustments to postretirement benefits obligation, net of deferred tax
(provision) benefit of $(39,130) and $55,591 for 2011 and 2010, respectively

See notes to the Consolidated Financial Statements.

2011

2010

$ 2,963,000

$ 1,079,000

$ (1,888,025)

$ (835,374)

$ 75,959

$ (107,913)

Investors Title Company and Subsidiaries
Notes to Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting Policies

Description of Business—Investors Title Company's (the "Company") primary business, and only reportable segment, is title insurance. The title
insurance segment, through its two subsidiaries, Investors Title Insurance Company ("ITIC") and National Investors Title Insurance Company ("NITIC"), is
licensed to insure titles to residential, institutional, commercial and industrial properties. The Company issues title insurance policies primarily through
approved attorneys from underwriting offices and through independent issuing agents in 22 states and the District of Columbia primarily in the eastern half of
the United States. The majority of the Company's business is concentrated in Illinois, Kentucky, Michigan, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee, Texas and Virginia.

Principles of Consolidation and Basis of Presentation—The accompanying Consolidated Financial Statements include the accounts of the Company and
its wholly owned subsidiaries and are prepared in accordance with smaller reporting company filing requirements. All significant intercompany balances and
transactions have been eliminated.

Reclassification—Certain 2010 amounts in the accompanying Consolidated Financial Statements have been reclassified to conform to the 2011

classifications. These reclassifications had no effect on stockholders’ equity or net income as previously reported.

Significant Accounting Policies—The significant accounting policies of the Company are summarized below.

Cash and Cash Equivalents

For the purpose of presentation in the Company's Consolidated Statements of Cash Flows, cash equivalents are highly liquid instruments with remaining

original maturities of three months or less. The carrying amount of cash and cash equivalents is a reasonable estimate of fair value due to the short-term
maturity at purchase of these instruments.

Investments in Securities

Securities for which the Company has the intent and ability to hold to maturity are classified as held-to-maturity and reported at cost, adjusted for
amortization of premiums or accretion of discounts, and other-than-temporary declines in fair value. Securities held principally for resale in the near term are
classified as trading securities and recorded at fair values. Realized and unrealized gains and losses on trading securities are included in other income.
Securities not classified as either trading or held-to-maturity are classified as available-for-sale and reported at fair value with unrealized gains and losses, net
of tax, adjusted for other-than-temporary declines in fair value, reported as accumulated other comprehensive income. Securities are regularly reviewed for
differences between the cost and estimated fair value of each security for factors that may indicate that a decline in fair value is other-than-temporary. Some
factors considered in evaluating whether or not a decline in fair value is other-than-temporary include the duration and extent to which the fair value has been
less than cost and the Company’s ability and intent to retain the investment for a period of time sufficient to allow for a recovery in value. Such reviews are
inherently uncertain and the value of the investment may not fully recover or may decline in future periods resulting in a realized loss. Fair values of the
majority of investments are based on quoted market prices. Realized gains and losses are determined on the specific identification method. Refer to Note 3
for further information regarding investments in securities and fair value.

Short-term Investments

Short-term investments comprise money market accounts which are invested in short-term funds, time deposits with banks and savings and loan
associations, and other investments expected to have maturities or redemptions greater than three months and less than twelve months. The Company
monitors any events or changes in circumstances that may have a significant adverse effect on the fair value of these investments.

Other Investments

Other investments consist primarily of investments in title insurance agencies structured as limited liability companies (“LLCs”), which are accounted

for under the equity or cost methods of accounting. The aggregate cost of the Company’s cost method investments totaled $1,210,687 and $1,107,115 at
December 31, 2011 and December 31, 2010, respectively. The Company monitors any events or changes in circumstances that may have had a significant
adverse effect on the fair value of these investments and makes any necessary adjustments.

Property Acquired in Settlement of Claims

Property acquired in settlement of claims is held for sale and valued at the lower of cost or market. Adjustments to reported estimated realizable values

and realized gains or losses on dispositions are recorded as increases or decreases in claim costs.

Property and Equipment

Property and equipment are recorded at cost and are depreciated principally under the straight-line method over the estimated useful lives (three to

twenty-five years) of the respective assets. Maintenance and repairs are charged to operating expenses and improvements are capitalized.

Reserves for Claims

The total reserve for all reported and unreported losses the Company incurred through December 31, 2011 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 incurred claims of policyholders which may be reported in the future. Despite the
variability of such estimates, management believes that the reserves are adequate to cover claim losses resulting from pending and future claims for policies
issued through December 31, 2011. The Company continually reviews and adjusts its reserve estimates as necessary to reflect its loss experience and any
new information that becomes available. Adjustments resulting from such reviews may be significant.

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 acquiring company carries assets at the lower of cost or
estimated realizable value, net of any indebtedness on the property.

Income Taxes

The Company makes certain estimates and judgments in determining income tax expense (benefit) for financial statement purposes. These estimates and
judgments occur in the calculation of certain tax assets and liabilities which arise from differences in the timing of recognition of revenue and expense for tax
and financial statement purposes. The Company provides for deferred income taxes (benefits) for the tax consequences in future years of temporary
differences between the financial statements' carrying values and the tax bases of assets and liabilities using currently enacted tax rates. The Company
establishes valuation allowances if it believes that it is more likely than not that some or all of its deferred tax assets will not be realized. Refer to Note 8 for
further information regarding income taxes.

Premiums Written and Commissions to Agents

Premiums are generally recorded and recognized as revenue at the time of closing of the related transaction as the earnings process is then considered

complete. The Company's premium revenues from certain agency operations include accruals based on estimates using historical information, as well as
other relevant trends and data. The accruals for premiums are necessary because of the lag between policy effective dates and the reporting of these
transactions to the Company by the agents. In addition to accruing these earned but unreported agency premiums, the Company also accrues agent
commission expenses, premium taxes and income taxes, and records a provision for claim losses at the prevailing provision rate as of the balance sheet date.

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 amounts receivable. Changes to the allowance for doubtful accounts are reflected within net premiums written in
the Consolidated Statements of Income. Amounts are charged off in the period they are deemed to be uncollectible.

Exchange Services Revenue

Fees are recognized at the signing of a binding agreement and investment earnings are recognized as they are earned.

Fair Values of Financial Instruments

The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, short-term investments, premium and fees receivable,
accrued interest and dividends, accounts payable, commissions payable, reinsurance payable and current income taxes payable approximate fair value due to
the short-term nature of these assets and liabilities. Fair values for the majority of investment securities are based on quoted market prices. Auction rate
securities (“ARS”) are valued using discounted cash flow models to determine the estimated fair value of these investments. Some of the inputs to
determining the fair value of ARS are unobservable in the securities markets and are significant.

Comprehensive Income

The Company's accumulated other comprehensive income is comprised of unrealized holding gains/losses on available-for-sale securities, net of tax,

and unrecognized prior service cost and unrealized gains/losses associated with postretirement benefit liabilities, net of tax. Accumulated other
comprehensive income as of December 31, 2011 consists of $7,563,541 of unrealized holding gains on available-for-sale securities and $54,376 of
unrecognized prior service cost and unrecognized actuarial losses associated with postretirement benefit liabilities. Accumulated other comprehensive
income as of December 31, 2010 consists of $5,675,516 of unrealized holding gains on available-for-sale securities and $13,189 of unrecognized prior
service cost and unrealized gains associated with postretirement benefit liabilities.

Share-Based Compensation

The Company accounts for share-based compensation in accordance with the fair value based principles required by the Financial Accounting Standards

Board (“FASB”). Estimated compensation expense for awards outstanding at the effective date is recognized over their remaining service period using the
compensation cost. Share-based compensation cost is generally measured at the grant date, based on the estimated fair value of the award, and is recognized
as expense over the employee’s requisite service period.

As share-based compensation expense recognized in the Consolidated Statements of Income is based on awards ultimately expected to vest, it has been

reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ
from those estimates.

Subsequent Events

The Company has evaluated and concluded that there were no material subsequent events requiring adjustment or disclosure to its Consolidated Financial

Statements.

Recently Issued Accounting Standards

In January 2010, the FASB updated the requirements for fair value measurements and disclosures to provide for additional disclosure related to transfers in and
out of fair value hierarchy Levels 1 and 2, and to require companies to present purchases, sales, issuances and settlements of Level 3 securities on a gross rather than
net basis. Refer to Note 3 for a discussion of valuation hierarchy levels. The new disclosures are clarifications of existing disclosures and are effective for interim
and annual reporting periods beginning after December 15, 2009, except that the disclosures requiring the presentation of Level 3 securities trading activity on a
gross basis are effective for fiscal years beginning after December 15, 2010. This update did not have an impact on the Company’s financial condition or results of
operations.

Pending Accounting Standards

In May 2011, the FASB updated requirements for measuring and disclosing fair value information, resulting in common principles and requirements in

accordance with accounting principles generally accepted in the United States of America (“GAAP”) and International Financial Reporting Standards (“IFRS”).
For public entities, this guidance becomes effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is
not permitted. Management does not expect the adoption of this standard to have a material impact on the Company’s Consolidated Financial Statements.

In June 2011, the FASB updated requirements relating to the presentation of comprehensive income. The objectives of this accounting update are to facilitate

convergence of GAAP and IFRS, to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items
reported in other comprehensive income. The main provisions of the guidance require that all nonowner changes in stockholders’ equity be presented either in a
single continuous statement of comprehensive income or in two separate but consecutive statements. For public entities, this update becomes effective for fiscal
years, and interim periods within those years, beginning after December 15, 2011. Management does not expect the adoption of this standard to have a material
impact on the Company’s Consolidated Financial Statements.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period and accompanying notes. Actual results could differ materially from those estimates and assumptions
used. The more significant of these estimates and assumptions include the following:

Claims—The Company's reserves for claims 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 incurred claims of policyholders which may be reported in the future (incurred but not reported,
or “IBNR”). A provision for estimated future claims payments is recorded at the time policy revenue is recorded as a percentage of premium income. By
their nature, title claims can often be complex, vary greatly in dollar amounts, vary in number due to economic and market conditions such as an increase in
mortgage foreclosures, and involve uncertainties as to ultimate exposure. In addition, some claims may require a number of years to settle and determine the
final liability for indemnity and loss adjustment expense. The payment experience may extend for more than 20 years after the issuance of a policy. Events
such as fraud, defalcation and multiple property defects can substantially and unexpectedly cause increases in estimates of losses. Due to the length of time
over which claim payments are made and regularly occurring changes in underlying economic and market conditions, these estimates are subject to
variability.

Management considers factors such as the Company’s historical claims experience, case reserve estimates on reported claims, large claims, actuarial
projections and other relevant factors in determining loss provision rates and the aggregate recorded expected liability for claims. In establishing reserves,
actuarial projections are compared with recorded reserves to evaluate the adequacy of such recorded claims reserves and any necessary adjustments are then
recorded in current operations. As the most recent claims experience develops and new information becomes available, the loss reserve estimate related to
prior periods will change to more accurately reflect updated and improved emerging data. The Company reflects any adjustments to reserves in the results of
operations in the period in which new information (principally claims experience) becomes available.

Impairments—Securities are regularly evaluated and reviewed for differences between the cost and estimated fair value of each security for factors that

may indicate that a decline in fair value is other-than-temporary. When, in the opinion of management, a decline in the fair value of an investment is
considered to be other-than-temporary, such investment is written down to its fair value. Some factors considered in evaluating whether or not a decline in
fair value is other-than-temporary include the duration and extent to which the fair value has been less than cost, the probability that the Company will be
unable to collect all amounts due under the contractual terms of the security; with respect to equity securities, whether the Company’s ability and intent to
retain the investment for a period of time is sufficient to allow for a recovery in value; with respect to fixed maturity securities, whether the Company has the
intent to sell or will more likely than not be required to sell a particular security before recovery in value; and the financial condition and prospects of the
issuer (including credit ratings). These factors are reviewed quarterly and any material degradation in the prospect for recovery will be considered in the
other-than-temporary impairment analysis. Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline in
future periods resulting in a realized loss. The fair values of the majority of the Company’s investments are based on quoted market prices from independent
pricing services.

2. Statutory Restrictions on Consolidated Stockholders' Equity and Investments

The Company has designated approximately $42,288,000 and $41,892,000 of retained earnings as of December 31, 2011 and 2010, respectively, as

appropriated to reflect the required statutory premium and supplemental reserves. See Note 8 for the tax treatment of the statutory premium reserve.

As of December 31, 2011 and 2010 approximately $73,216,000 and $65,297,000, respectively, of consolidated stockholders' equity represents

net assets of the Company's subsidiaries that cannot be transferred in the form of dividends, loans or advances to the parent company under statutory
regulations without prior insurance department approval.

Bonds totaling approximately $6,704,000 and $6,570,000 at December 31, 2011 and 2010 respectively, are deposited with the insurance departments of

the states in which business is conducted.

3. Investments in Securities and Fair Value

The aggregate fair value, gross unrealized holding gains, gross unrealized holding losses, and amortized cost for securities by major security type at

December 31 were as follows:

December 31, 2011
Fixed maturities, available-for-sale, at fair value-
Obligations of states and political subdivisions
Corporate debt securities
Auction rate securities
Total
Equity securities, available-for-sale at fair value-
Common stocks and nonredeemable preferred stocks
Total
Short-term investments-
Certificates of deposit and other
Total

December 31, 2010
Fixed maturities, available-for-sale, at fair value-
Obligations of states and political subdivisions
Corporate debt securities
Auction rate securities

Total
Equity securities, available-for sale at fair value-
Common stocks and nonredeemable preferred stocks
Total
Short-term investments-
Certificates of deposit and other
Total

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

$ 62,042,929
12,188,639
4,552,400

$ 13,869 $ 67,612,793
13,242,172
148,616
4,552,400
-
$ 78,783,968 $ 6,785,882 $ 162,485 $ 85,407,365

$ 5,583,733
1,202,149
-

$ 17,652,745
$ 17,652,745

$ 4,939,053
$ 4,939,053

$ 41,823 $ 22,549,975
$ 41,823 $ 22,549,975

$ 14,112,262
$ 14,112,262

$ - $ - $ 14,112,262
$ - $ - $ 14,112,262

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

$ 64,120,509
12,258,359
5,405,394

$ 3,248,821
1,123,051
66,850
$ 81,784,262 $ 4,438,722

$ 166,690
22,737
-
$ 189,427

$ 67,202,640
13,358,673
5,472,244
$ 86,033,557

$ 9,458,773
$ 9,458,773

$ 4,430,175 $ 16,578
$ 16,578
$ 4,430,175

$ 13,872,370
$ 13,872,370

$ 27,203,550
$ 27,203,550

$ - $ -
$ - $ -

$ 27,203,550
$ 27,203,550

The scheduled maturities of fixed maturity securities at December 31, 2011 were as follows:

Due in one year or less
Due after one year through five years
Due five years through ten years
Due after ten years
Total

Available-for-Sale

Amortized
Cost
$ 7,199,401
31,480,952
31,679,226
8,424,389

Fair
Value
$ 7,326,825
33,615,289
35,234,049
9,231,202
$ 78,783,968 $ 85,407,365

Earnings on investments for the years ended December 31 were as follows:

Fixed maturities
Equity securities
Invested cash and other short-term investments
Miscellaneous interest
Investment income

2011

2010

$ 3,233,988
347,843
12,725
480
$ 3,595,036

$ 3,411,888
234,598
23,433
1,259
$ 3,671,178

Gross realized gains and losses on sales of available-for-sale securities for the years ended December 31 are summarized as follows:

Gross realized gains:
Obligations of states and political subdivisions
Common stocks and nonredeemable preferred stocks
Auction rate securities
Total
Gross realized losses:
Obligations of states and political subdivisions
Common stocks and nonredeemable preferred stocks
Other than temporary impairment of securities
Total
Net realized gain

2011

2010

$ 20,845
529,810
43,200
593,855

$ 98,197
1,193,029
-
1,291,226

-
(247,117)
(280,987)
(528,104)
$ 65,751

(111,500)
(97,157)
(335,551)
(544,208)
$ 747,018

Realized gains and losses are determined on the specific identification method. Also included in net realized gain on sales in the Consolidated
Statements of Income are net gains and impairments of other investments and net losses on sales and impairments of property acquired in the settlement of
claims totaling $(37,192) and $(92,344) for the twelve months ended December 31, 2011 and 2010, respectively.

The following table presents the gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment

category and length of time that individual securities have been in a continuous loss position at December 31, 2011 and 2010.

December 31, 2011
Obligations of states and
political subdivisions
Corporate debt securities
Total fixed maturity

securities
Equity securities
Total temporarily

Less than 12 Months

12 Months or Longer

Total

Fair Value

Unrealized Loss Fair Value

Unrealized Loss

Fair Value

Unrealized Loss

$ 663,666
3,015,769

$ (64)
(148,616)

$ 1,023,180
-

$ (13,805)
-

$ 1,686,846
3,015,769

$ (13,869)
(148,616)

$ 3,679,435
957,072

$ (148,680)
(40,893)

$ 1,023,180
104,130

$ (13,805)
(930)

$ 4,702,615
1,061,202

$ (162,485)
(41,823)

impaired securities

$ 4,636,507

$ (189,573)

$ 1,127,310

$ (14,735)

$ 5,763,817

$ (204,308)

December 31, 2010
Obligations of states and
political subdivisions
Corporate debt securities
Total fixed maturity

securities

Equity securities
Total temporarily

$ 7,008,818
1,077,263

$ (166,690)
(22,737)

$ -
-

$ 7,008,818
1,077,263

$ (166,690)
(22,737)

$ 8,086,081
746,388

$ (189,427)
(7,710)

$ -
220,635

$ -
(8,868)

$ 8,086,081
967,023

$ (189,427)
(16,578)

impaired securities

$ 8,832,469

$ (197,137)

$ 220,635

$ (8,868)

$ 9,053,104

$ (206,005)

As of December 31, 2011, the Company held $4,702,615 in fixed maturity securities with unrealized losses of $162,485. As of December 31, 2010, the

Company held $8,086,081 in fixed maturity securities with unrealized losses of $189,427. The decline in fair value of the fixed maturity securities can be
attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Because the Company does not have the intent
to sell these securities and likely will not be compelled to sell them before it can recover its cost basis, the Company does not consider these investments to
be other-than-temporarily impaired.

As of December 31, 2011, the Company held $1,061,202 in equity securities with unrealized losses of $41,823. As of December 31, 2010, the

Company held $967,023 in equity securities with unrealized losses of $16,578. The unrealized losses related to holdings of equity securities were caused by
market changes that the Company considers to be temporary. Since the Company has the intent and ability to hold these equity income securities until a
recovery of fair value, the Company does not consider these investments other-than-temporarily impaired.

Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been below cost, the

financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 13 and 26 securities had
unrealized losses at December 31, 2011 and December 31, 2010, respectively. Reviews of the values of securities are inherently uncertain and the value of
the investment may not fully recover, or may decline in future periods resulting in a realized loss. During 2011, the Company recorded an other-than-
temporary impairment charge in the amount of $280,987 related to securities, of which, $101,861 was related to Level 3 ARS that have had a history of being
below cost and a change in intent not to sell. During 2010, the Company recorded an other-than-temporary impairment charge in the amount of $382,692
related to securities, of which, $281,156 was related to Level 3 ARS that have had a history of being below cost and a change in intent not to sell. Other-
than-temporary impairment charges are included in net realized gain on investments in the Consolidated Statements of Income.

Valuation Hierarchy. 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.

Valuation Techniques. A financial instrument’s classification within the valuation hierarchy is based upon the lowest level of input that is significant to

the fair value measurement—consequently, if there are multiple significant valuation inputs that are categorized in different levels of the hierarchy, the
instrument’s hierarchy level is the lowest level (with Level 3 being the lowest level) within which any significant input falls.

The Level 1 category includes equity securities 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. Their fair

value is principally based on market values obtained from a third party pricing service. Factors that are used in determining their 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 the pricing service, although as discussed below, the Company does consult other price resources when
confirming that the prices it obtains reflect the fair values of the instruments in accordance with 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 December 31, 2011 and
2010, 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 third party 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 ARS because quoted prices were unavailable due to the failure of
auctions. Some of the inputs to this model are unobservable in the market and are significant—therefore, the Company utilizes another third party pricing
service to assist in the determination of fair market value of these securities. That 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
December 31, 2011 and 2010:

Cumulative probability of earning maximum rate until maturity
Cumulative probability of principle returned prior to maturity
Cumulative probability of default at some future point

2011
0.0-0.1%
95.4-98.7%
1.3-4.6%

2010
0.0-0.8%
85.3-98.6%
1.4-14.7%

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 2011 and 2010, the difference in the
low and high values of the ranges was approximately three percent of the carrying value of the Company’s ARS.

The Company’s ARS portfolio is comprised entirely of investment grade student loan ARS. The par value of the ARS bonds was $5,000,000 and

$5,900,000 as of December 31, 2011 and 2010, respectively, with approximately 79.6% and 82.2% as of December 31, 2011 and 2010, respectively,
guaranteed by the U.S. Department of Education.

The following table presents, by level, the financial assets carried at fair value measured on a recurring basis as of December 31, 2011 and 2010. 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.

As of December 31, 2011
Equity
Common stock and nonredeemable preferred stock
Fixed Maturities
Obligations of states and political subdivisions*
Corporate debt securities*
Total

Level 1

Level 2

Level 3

Total

$ 22,549,975

$ -

$ 22,549,975

-
-
$ 22,549,975

67,612,793
13,242,172
$ 80,854,965

1,834,700
2,717,700
$ 4,552,400

69,447,493
15,959,872
$ 107,957,340

As of December 31, 2010
Equity Securities
Common stock and nonredeemable preferred stock
Fixed Maturities
Obligations of states and political subdivisions*
Corporate debt securities*
Total

*Denotes fair market value obtained from pricing services.

Level 1

Level 2

Level 3

Total

$ 13,872,370

$ -

$ 13,872,370

-
-
$ 13,872,370

67,202,640
13,358,673
$ 80,561,313

2,618,844
2,853,400
$ 5,472,244

69,821,484
16,212,073
$ 99,905,927

There were no transfers into or out of Levels 1 and 2 during 2011. The following table presents a reconciliation of the Company’s assets measured at

fair value using significant unobservable inputs (Level 3) as defined for the period ended December 31, 2011 and 2010:

Changes in fair value during the year ended December 31:

Redemptions and sales
Realized gain – included in net realized gain on investments
Realized loss – included in net realized gain on investments
Unrealized gain - included in other comprehensive income

2011
Beginning balance at January 1 $ 5,472,244
(900,000)
43,199
(101,861)
38,818

2010
$ 10,097,795
(4,938,500)
78,270
(392,656)
627,335
Ending balance at December 31 $ 4,552,400 $ 5,472,244

Certain cost method investments are measured at estimated fair value on a non-recurring basis, such as investments that are impaired during the period

and recorded at estimated fair value in the Consolidated Financial Statements as of December 31, 2011 and 2010. The following table summarizes the
corresponding estimated fair value hierarchy of such investments at December 31, 2011 and 2010 and the related impairments recognized:

Valuation
Method

Fair Value
Fair Value

Impaired

Level 1

Level 2

Level 3

Total
Estimated
Fair
Market
Value

Impairment
Losses

Yes
Yes

$ -
-

$ 58,281
17,000

$ (28,904)
(15,500)

$ -

$ 75,281

$ (44,404)

Fair Value
Fair Value

Yes
Yes

$ -
-

$ 52,625
-

$ (47,141)
(47,550)

$ -

$ 52,625

$ (94,691)

December 31, 2011
Cost method
investments

Other assets
Total cost method

investments and other
assets

December 31, 2010
Cost method
investments

Other assets
Total cost method

investments and other
assets

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 to ensure appropriate pricing. Pricing procedures and inputs used to price each security include, but are not limited to the
following: unadjusted quoted market prices for identical securities such as stock market closing prices, non-binding quoted prices for identical securities in
markets that are not active, interest rates, yield curves observable at commonly quoted intervals, volatility, prepayment speeds, loss severity, credit risks and
default rates. The Company reviews the procedures and inputs used by its pricing services and verifies a sample of the services’ quotes by comparing them
to values obtained from other pricing resources. In the event the Company disagrees with a price provided by its pricing services, the 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.

4. Property and Equipment

Property and equipment and estimated useful lives at December 31 are summarized as follows:

Land
Office buildings and improvements (25 years)
Furniture, fixtures and equipment (3 to 10 years)
Automobiles (3 years)
Total
Less accumulated depreciation
Property and equipment, net

2011
$ 1,107,582
3,259,383
5,114,112
792,592
10,273,669
(6,720,453)
$ 3,553,216

2010
$ 1,107,582
3,196,546
4,975,753
704,417
9,984,298
(6,311,981)
$ 3,672,317

5. Reinsurance

The Company assumes and cedes reinsurance with other insurance companies in the normal course of business. Premiums assumed and ceded were
approximately $17,000 and $177,000, respectively, for 2011 and $33,000 and $202,000, respectively, for 2010. Ceded reinsurance is comprised of excess of loss
treaties, which protects against losses over certain amounts. The Company remains liable to the insured for claims under ceded insurance policies in the event
that the assuming insurance companies are unable to meet their obligations under these contracts. The Company has not paid or recovered any reinsured
losses during the years ended December 31, 2011 and 2010.

6. Reserves for Claims

Changes in the reserves for claims for the years ended December 31 are summarized as follows based on the year in which the policies were written:

Balance, beginning of year
Provisions related to:
Current year
Prior years
Total provision charged to operations
Claims paid, net of recoveries, related to:
Current year
Prior years
Total claims paid, net of recoveries
Balance, end of year

2011
$ 38,198,700

2010
$ 39,490,000

6,845,338
(3,502,911)
3,342,427

6,744,917
(2,309,851)
4,435,066

(305,079)
(3,240,048)
(3,545,127)
$ 37,996,000

(303,800)
(5,422,566)
(5,726,366)
$ 38,198,700

The Company continually refines its reserve estimates as current loss experience develops and credible data emerges. Movements in the reserves related
to prior periods were primarily the result of claim recoveries, as well as changes to estimates to better reflect the latest reported loss data. The Company does
not recognize claim recoveries until an actual payment has been received by the Company. During 2011, the Company realized claim recoveries of
approximately $1,488,000. During 2010, the Company realized claim recoveries of approximately $3,100,000.

The provision for claims as a percentage of net premiums written was 4.1% and 7.2% in 2011 and 2010, respectively. The change in estimate for
calendar year 2011 from 2010 resulted mostly from favorable development in 2011 versus prior year related primarily to policy years 2007 through 2010.
Due to variances between actual and expected loss payments, loss development is subject to significant variability.

A large claim is defined as a claim with incurred losses exceeding $250,000. Due to the small volume of large claims, the long-tail nature of title
insurance claims and the inherent uncertainty in loss emergence patterns, large claim activity can vary significantly between policy years. The estimated
development of large claims by policy year is therefore subject to significant changes as experience develops.

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

Known title claims
IBNR
Total loss reserves

2011
$ 6,233,501
31,762,499
$ 37,996,000

Percentage

16.4%
83.6%
100.0%

2010
$ 6,121,941
32,076,759
$ 38,198,700

Percentage

16.0%
84.0%
100.0%

In management's opinion, the reserves are adequate to cover claim losses which might result from pending and future claims.

7. Earnings Per Share and Stock Options

Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the
reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive potential common stock, comprised
of shares issuable under the Company’s share-based compensation plans and the weighted-average number of common shares outstanding during the
reporting period. Dilutive common share equivalents includes 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 service that the Company has not yet recognized; and (c) the
amount of estimated tax benefits that would be recorded in additional paid-in capital, if any, are assumed to be used to repurchase shares in the current
period. The incremental dilutive potential common shares, calculated using the treasury stock method was 18,286 and 5,190 for 2011 and 2010, respectively.
The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31:

For the Years Ended December 31,
Net income
Weighted average common shares outstanding - Basic
Incremental shares outstanding assuming
the exercise of dilutive stock options and SARs (share settled)
Weighted average common shares outstanding - Diluted
Basic earnings per common share
Diluted earnings per common share

2011

2010

$ 6,933,936 $ 6,372,626
2,284,657

2,151,350

18,286
2,169,636

5,190
2,289,847
$ 3.22 $ 2.79
$ 3.20 $ 2.78

In 2011 and 2010, 11,500 and 13,500 awards, respectively, were excluded from the computation of diluted earnings per share because their exercise

price was greater than the stock price and therefore considered anti-dilutive.

The Company has adopted employee stock award plans (the "Plans") under which restricted stock, and options or stock appreciation rights (“SARs”) to
purchase 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 are
exercisable and vest immediately or within one year or at 10% to 20% per year beginning on the date of grant and generally expire in five to ten years. All
SARs issued to date have been share settled only. No SARs were exercised in 2011 or 2010.

A summary of share-based award transactions for all share-based award plans follows:

Weighted
Average
Exercise
Price

Average
Remaining
Contractual
Term (years)

Number
of Shares

Aggregate
Intrinsic
Value

Outstanding as of January 1, 2010
SARs granted
Options exercised
Options/SARs cancelled/forfeited/expired

Outstanding as of December 31, 2010
SARs granted
Options exercised
Options/SARs cancelled/forfeited/expired

Outstanding as of December 31, 2011

117,245
3,000
(9,445)
-

110,800

3,000
(7,700)
(4,500)

101,600

$ 27.54
33.31
14.88
-

$ 28.77

41.50
20.15
28.61

$ 29.81

5.10

$ 541,543

4.51

$ 353,955

3.91

$ 697,780

Exercisable as of December 31, 2011

99,630

$ 29.76

3.91

$ 686,604

Unvested as of December 31, 2011

1,970

$ 32.28

3.58

$ 11,176

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s

common stock at December 31, 2011. The intrinsic values of options exercised during 2011 and 2010 were approximately $118,000 and $158,000,
respectively.

The following tables summarize information about fixed stock options outstanding at December 31, 2011:

Range of Exercise Prices
$ 19.99
-
$ 10.00
27.96
-
20.00
31.99
-
27.98
36.79
-
33.32
$ 36.79
-
$ 10.00

Range of Exercise Prices
$ 27.97
-
$ 27.97
32.00
-
32.00
33.31
-
33.31
49.04
-
36.80
$ 49.04
-
$ 27.97

Options Outstanding at Year-End
Weighted
Average
Remaining
Contractual Life
0.28
1.10
2.43
3.38
1.88

Weighted
Average
Exercise
Price
$ 18.92
22.77
31.08
36.79
$ 27.67

Number
Outstanding
500
5,400
3,700
2,000
11,600

SARs Outstanding at Year-End
Weighted
Average
Remaining
Contractual Life
4.17
4.39
5.39
3.70
4.17

Weighted
Average
Exercise
Price
$ 27.97
32.00
33.31
45.25
$ 30.08

Number
Outstanding
75,000
2,500
3,000
9,500
90,000

Options Exercisable at Year-End

Number
Exercisable

500
4,800
3,080
2,000
10,380

Weighted
Average
Exercise
Price

$ 18.92
22.87
31.08
36.79
$ 27.80

SARs Exercisable at Year-End
Weighted
Average
Exercise
Price

Number
Exercisable

75,000
2,500
3,000
8,750
89,250

$ 27.97
32.00
33.31
45.57
$ 29.99

In 2011, 21,336 options and SARs vested with a fair value of $204,965.

During the second quarter of 2011, the Company issued 3,000 share settled SARs to select officers and directors of the Company. During the second

quarter of 2010, the Company issued 3,000 share settled SARs to select officers and 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. As such, the SARs were valued using the Black-Scholes option valuation model. 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 following table. Expected volatilities are based on both
the implied and historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within
the valuation model. The expected term of awards represents the period of time that options granted are expected to be outstanding. The interest rate for
periods during 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 2011 and 2010 were $15.55 and $12.30, respectively, and were estimated using the

following weighted-average assumptions:

Expected Life in Years
Expected Volatility
Weighted-Average Volatility
Interest Rate
Yield Rate

2011
5.0
43.6%
43.6%
1.87%
0.84%

2010
5.0
42.4%
42.4%
2.13%
0.83%

There was approximately $214,000 and $217,000 of compensation expense relating to shares vesting on or before December 31, 2011 and December

31, 2010, respectively, included in salaries, employee benefits and payroll taxes of the Consolidated Statements of Income. As of December 31, 2011, there
was approximately $42,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the
Company’s stock awards plans. That cost is expected to be recognized over a weighted-average period of approximately 5 months.

The estimated weighted-average grant-date fair value of SARs granted for the years ended December 31 was as follows:

For the Years Ended December 31,
Exercise price equal to market price on date of grant:
Weighted-average market price
Weighted-average grant-date fair value

2011

$41.50
$15.55

2010

$33.31
$12.30

There are no stock options or SARs granted where the exercise price is less than the market price on the date of grant.

8. Income Taxes

The components of income tax expense for the years ended December 31 are summarized as follows:

For the Years Ended December 31,
Current:
Federal
State

Total current

Deferred:
Federal
State

Total deferred

Total

2011

2010

$ 2,515,000
29,000
2,544,000

$ 1,388,000
23,000
1,411,000

28,131
(7,131)
21,000
$ 2,565,000

825,465
6,535
832,000
$ 2,243,000

For state income tax purposes, ITIC and NITIC generally pay only a gross premium tax found in premium and retaliatory taxes in the Consolidated

Statements of Income.

At December 31, the approximate tax effect of each component of deferred income tax assets and liabilities is summarized as follows:

For the Years Ended December 31,
Deferred income tax assets:
Recorded reserves for claims, net of statutory premium reserves
Accrued benefits and retirement services
Postretirement benefit obligation
Other-than-temporary impairment of assets
Reinsurance and commissions payable
Allowance for doubtful accounts
Net operating loss carryforward
Capital loss carryforward
Excess of book over tax depreciation
Other
Total
Deferred income tax liabilities:
Recorded reserves for claims, net of statutory premium reserves
Net unrealized gain on investments
Postretirement benefit obligation
Discount accretion on tax-exempt obligations
Other
Total
Net deferred income tax (liabilities) assets

2011

2010

$ - $ 29,911
2,215,857
-
420,305
25,302
483,140
49,000
-
90,352
416,214
3,730,081

2,491,168
28,026
434,929
38,969
414,120
30,000
5,194
113,648
491,479
4,047,533

290,318

3,956,708
-
-
279,870
4,526,896
$ (479,363)

-
2,986,999
6,785
23,813
235,950
3,253,547
$ 476,534

At December 31, 2011 and 2010, no valuation allowance was recorded. Based upon the Company’s historical results of operations, the existing financial

condition of the Company and management’s assessment of all other available information, management believes that it is more likely than not that the
benefit of these deferred income tax assets will be realized.

A reconciliation of income tax as computed for the years ended December 31 at the U.S. federal statutory income tax rate (34%) to income tax expense

follows:

For the Years Ended December 31,
Anticipated income tax expense
Increase (decrease) related to:
State income taxes, net of federal income tax benefit
Tax-exempt interest income (net of amortization)
Other, net
Provision for income taxes

2011

2010

$ 3,229,638 $ 2,929,313

19,140
(700,300)
16,522

15,180
(743,025)
41,532
$ 2,565,000 $ 2,243,000

In accounting for uncertainty in income taxes, the Company is required to recognize in its financial statements the impact of a tax position if that

position is more likely than not of being sustained on an audit, based on the technical merits of the position. In this regard, an uncertain tax position
represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been
reflected in measuring income tax expense for financial reporting purposes. There were no unrecognized tax benefits or liabilities as of December 31, 2011.

The amount of unrecognized tax benefit or liability may increase or decrease in the future for various reasons, including adding amounts for current tax
year positions, expiration of open income tax returns due to the expiration of the applicable statute of limitations, changes in management’s judgment about
the level of uncertainty, status of examinations, litigation and legislative activity and the additions or eliminations of uncertain tax positions.

The Company’s policy is to report interest and penalties related to income taxes in the Other line item in the Consolidated Statements of Income.

The Company, or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various states. With few exceptions, the Company

is no longer subject to U.S. federal or state and local examinations by taxing authorities for years before 2008.

9. Leases

The Company leases certain office facilities and equipment under operating leases. Rental expense also includes occasional rental of automobiles. Rent
expense totaled approximately $623,000 and $773,000 in 2011 and 2010, respectively. The future minimum lease payments under operating leases that have
initial or remaining noncancelable lease terms in excess of one year as of December 31, 2011, are summarized as follows:

Year Ended:
2012
2013
2014
2015
2016
Thereafter
Total

$ 476,822
261,798
176,877
134,027
79,826
-
$ 1,129,350

10. Retirement Agreements and Other Postretirement Benefit Plan

The Company has a 401(k) savings plan. In order to participate, individuals must be employed for one full year and work at least 1,000 hours annually.
The Company makes a 3% Safe Harbor contribution and also has the option annually to make a discretionary profit share contribution. Individuals may elect
to make contributions up to the maximum deductible amount as determined by the Internal Revenue Code. Expenses related to the 401(k) were
approximately $479,000 and $484,000 for 2011 and 2010, respectively.

In November 2003, ITIC, a wholly owned subsidiary of the Company, entered into employment agreements with the Chief Executive Officer, Chief
Financial Officer and Chief Operating Officer of ITIC. These individuals also serve as the Chairman, President and Executive Vice President, respectively, of
the Company. The agreements provide compensation and life, health, dental and vision benefits upon the occurrence of specific events, including death,
disability, retirement, termination without cause or upon a change in control. The employment agreements also prohibit each of these executives from
competing with ITIC and its parent, subsidiaries and affiliates in the State of North Carolina while employed by ITIC and for a period of two years following
termination of their employment.

In addition, during the second quarter of 2004, ITIC entered into nonqualified deferred compensation plan agreements with these executives. The

amount accrued for all agreements at December 31, 2011 and 2010 was approximately $5,740,000 and $5,134,000, respectively, which includes
postretirement compensation and health benefits, and was calculated based on the terms of the contract. Both the 2011 and 2010 accruals are included in the
Accounts Payable and Accrued Liability line item of the Consolidated Balance Sheets. These executive contracts are accounted for on an individual contract
basis. On December 24, 2008, the executive contracts were amended effective January 1, 2009 to bring them into compliance with Section 409A of the
Internal Revenue Code, and were amended and restated to provide for an annual cash payment to the officers equal to the amounts the Company would have
contributed to their accounts under its 401(k) Plan if such contributions were not limited by the federal tax laws, less the amount of any contributions that the
Company actually makes to their accounts under the Company’s 401(k) Plan.

On November 17, 2003, ITIC entered into employment agreements with key executives that provide for the continuation of certain employee benefits

upon retirement. The executive employee benefits include health insurance, dental insurance, vision insurance and life insurance. The benefits are
unfunded. Estimated future benefit payouts expected to be paid for each of the next five years are $4,437 in 2012, $5,678 in 2013, $6,201 in 2014, $6,729 in
2015, $7,262 in 2016 and $88,280 in the next five years thereafter.

Cost of the Company’s postretirement benefits included the following components:

Net periodic benefit cost
Service cost – benefits earned during the year
Interest cost on projected benefit obligation
Amortization of unrecognized prior service cost
Amortization of unrecognized (gain) loss
Net periodic benefit cost at end of year

2011

2010

$ 19,503
24,607
13,038
(318)
$ 56,830

$ 25,698
30,755
20,388
2,572
$ 79,413

The Company is required to recognize the funded status (i.e., the difference between the fair value of the assets and the accumulated postretirement

benefit obligations of its postretirement benefits) in its Consolidated Balance Sheet, with a corresponding adjustment to accumulated other comprehensive
income, net of tax. The net amount in accumulated other comprehensive income is $(82,392), $(54,376) net of tax, for December 31, 2011, and $19,977,
$13,189 net of tax, for December 31, 2010, and represents the net unrecognized actuarial losses and unrecognized prior service costs. The effects of the
funded status on the Company’s Consolidated Balance Sheets at December 31, 2011 and 2010 are presented in the following table:

Funded status
Actuarial present value of future benefits:
Fully eligible active employee
Non-eligible active employees
Plan assets
Funded status of accumulated postretirement benefit obligation, recognized in
other liabilities

2011

2010

$ (354,308)
(234,586)
-

$ (36,253)
(393,442)
-

$ (588,894)

$ (429,695)

Development of the accumulated postretirement benefit obligation for the years ended December 31, 2011 and 2010 includes the following:

Accrued postretirement benefit obligation at beginning of year
Service cost – benefits earned during the year
Interest cost on projected benefit obligation
Plan amendments
Actuarial (loss) gain
Accrued postretirement benefit obligation at end of year

2011
$ (429,695)
(19,503)
(24,607)
-
(115,089)
$ (588,894)

2010
$ (536,746)
(25,698)
(30,755)
25,665
137,839
$ (429,695)

The changes in amounts related to accumulated other comprehensive income, pre-tax, are as follows:

Balance at beginning of year
Components of accumulated other comprehensive income
Unrecognized prior service cost
Amortization of gain (loss), net
Actuarial loss (gain)
Plan amendments
Balance at end of year

2011
$ (19,977)

2010
$ 166,487

(13,038)
318
115,089
-
$ 82,392

(20,388)
(2,572)
(137,839)
(25,665)
$ (19,977)

For 2011, the amounts in accumulated other comprehensive income, pre-tax, to be recognized as components of net periodic benefit costs are:

Amortization of unrecognized prior service cost
Amortization of unrecognized loss
Net periodic benefit cost at end of year

Projected
2012
$ 9,396
681
$ 10,077

Assumed health care cost trend rates do have an effect on the amounts reported for the postretirement benefit obligations. The following illustrates the

effects on the net periodic postretirement benefit cost (“NPPBC”) and the accumulated postretirement benefit obligation (“APBO”) of a one percentage point
increase and one percentage point decrease in the assumed health care cost trend rate as of December 31, 2011:

Net periodic postretirement benefit cost
Effect on the service cost component
Effect on interest cost
Total effect on the net periodic postretirement benefit cost
Accumulated postretirement benefit obligation (including active
employees who are not fully eligible)
Effect on those currently receiving benefits (retirees and spouses)
Effect on active fully eligible
Effect on actives not yet eligible
Total effect on the accumulated postretirement benefit obligation

One-
Percentage
Point
Increase

One-
Percentage
Point
Decrease

$ 3,506
6,216
$ 9,722

$ (2,619)
(4,745)
$ (7,364)

$ -
65,623
65,235
$ 130,858

$ -
(51,191)
(48,702)
$ (99,893)

11. Commitments and Contingencies

Legal Proceedings. A class action lawsuit is pending in the United States District Court for the Southern District of West Virginia against several title

insurance companies, including Investors Title Insurance Company, entitled Backel v. Fidelity National Title Insurance et al. (6:2008-CV-00181). The
plaintiff in this case contends a lack of meaningful oversight by agencies with which title insurance rates are filed and approved. There are further allegations
that the title insurance companies have conspired to fix title insurance rates. The plaintiffs seek monetary damages, including treble damages, as well as
injunctive relief. Similar suits have been filed in other jurisdictions, several of which have already been dismissed. In West Virginia, the case has been
placed on the inactive list pending the resolution of the bankruptcy of LandAmerica Financial Group, Inc. The Company believes that this case is without
merit, and intends to vigorously defend against the allegations. At this stage in the litigation, the Company does not have the ability to make a reasonable
range of estimates in regards to potential loss amounts, if any.

The Company and its subsidiaries are also involved in other legal proceedings that are incidental to their business. In the Company’s opinion, based on

the present status of these proceedings, any potential liability of the Company or its subsidiaries with respect to these legal proceedings, will not, in the
aggregate, be material to the Company’s consolidated financial condition or operations.

Potential Acquisition. In January 2012, the Company executed a membership interest purchase and sale agreement under which the Company has
agreed to acquire a majority 70% ownership interest of a previously unaffiliated agency. The agreement also contains an option for the Company to acquire
the entire agency. No estimated purchase price can be calculated at this time. The membership interest purchase and sale agreement stipulates a maximum
purchase price of $1,041,250 for only the majority interest, and a minimum purchase price of $1,000,000 for the entire agency. The actual purchase cost may
deviate from both the maximum and minimum amounts. The closing, subject to the satisfaction of certain conditions, is anticipated to be in the second
quarter of 2012.

Regulation. The Company’s title insurance and trust subsidiaries are regulated by various federal, state and local governmental agencies and are subject

to various audits and inquiries. It is the opinion of management that, based on its present expectations, these audits and inquiries will not have a material
impact on the Company’s consolidated financial condition or operations.

Escrow and Trust Deposits. As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest
money received under real estate contracts, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. Cash
held by the Company for these purposes was approximately $15,562,000 and $17,472,000 as of December 31, 2011 and 2010, respectively. These amounts
are not considered assets of the Company and are excluded from the accompanying Consolidated Balance Sheets. However, the Company remains
contingently liable for the disposition of these deposits.

Like-Kind Exchange Proceeds. In administering tax-deferred property exchanges, the Company’s subsidiary, ITEC, serves as a qualified intermediary

for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. Another Company subsidiary,
ITAC, serves as exchange accommodation titleholder and, through limited liability companies (“LLCs”) that are wholly owned subsidiaries of ITAC, holds
property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property totaled approximately $35,359,000 and
$23,044,000 as of December 31, 2011 and 2010, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the
accompanying Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of the transfers of property,
disbursements of proceeds and the return on the proceeds at the agreed upon rate. Exchange services revenues include earnings on these deposits; therefore,
investment income is shown as exchange services revenue, rather than investment income. These like-kind exchange funds are primarily invested in money
market and other short-term investments, including approximately $1,000,000 of par value auction rate securities, as of December 31, 2011. The Company
does not believe the current illiquidity of the ARS will impact its operations, as it believes it has sufficient capital to provide continuous and immediate
liquidity as necessary.

12. Statutory Accounting

The Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America

which differ in some respects from statutory accounting practices prescribed or permitted in the preparation of financial statements for submission to
insurance regulatory authorities.

Combined capital and surplus on a statutory basis was $93,089,327 and $93,626,173 as of December 31, 2011 and 2010, respectively. Net income on a

statutory basis was $6,416,684 and $5,797,068 for the twelve months ended December 31, 2011 and 2010, respectively.

13. Segment Information

Consistent with the requirements of reporting 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 residential, institutional, commercial and industrial properties.

Provided below is selected financial information about the Company's operations by segment for the two years ended December 31, 2011 and 2010:

2011
Operating revenues
Investment income
Net realized gain (loss) on investments
Total revenues
Operating expenses
Income before taxes
Assets

2010
Operating revenues
Investment income
Net realized gain (loss) on investments
Total revenues
Operating expenses
Income before taxes
Assets

14. Stockholders' Equity

Title
Insurance
$ 83,420,562
3,174,148
97,640
$ 86,692,350
77,294,353
$ 9,397,997
$ 123,712,762

All
Other
$ 4,455,631
502,557
(69,081)
$ 4,889,107
4,706,499
$ 182,608
$ 34,245,701

Intersegment
Elimination
$ (814,632)
(81,669)
-
$ (896,301)
(814,632)
$ (81,669)
$ -

Total
$ 87,061,561
3,595,036
28,559
$ 90,685,156
81,186,220
$ 9,498,936
$ 157,958,463

Title
Insurance
$ 63,502,167
3,149,932
728,508
$ 67,380,607
58,765,581
$ 8,615,026
$ 112,664,322

All
Other
$ 4,271,433
602,915
(73,834)
$ 4,800,514
4,718,245
$ 82,269
$ 40,821,044

Intersegment
Elimination
$ (790,097)
(81,669)
-
$ (871,766)
(790,097)
$ (81,669)
$ -

Total
$ 66,983,503
3,671,178
654,674
$ 71,309,355
62,693,729
$ 8,615,626
$ 153,485,366

On November 12, 2002, the Company's Board of Directors amended the Company's Articles of Incorporation, creating a series of Class A Junior
Participating Preferred Stock (the "Class A Preferred Stock"). There are 1,000,000 shares of Preferred Stock authorized and 100,000 of these shares have
been designated Class A Junior Participating Preferred Stock. The Class A Preferred Stock is senior to common stock in dividends or distributions of assets
upon liquidations, dissolutions or winding up of the Company. Dividends on the Class A Preferred Stock are cumulative and accrue from the quarterly
dividend payment date. Each share of Class A Preferred Stock entitles the holder thereof to 100 votes on all matters submitted to a vote of shareholders of the
Company. These shares were reserved for issuance under the Shareholder Rights Plan (the "Plan"), which was adopted on November 21, 2002, by the
Company's Board of Directors. Under the terms of the Plan, the Company's common stock acquired by a person or a group buying 15% or more of the
Company's common stock would be diluted, except in transactions approved by the Board of Directors.

In connection with the Plan, the Company's Board of Directors declared a dividend distribution of one right (a "Right") for each outstanding share of the

Company's common stock paid on December 16, 2002, to shareholders of record at the close of business on December 2, 2002. Each Right entitles the
registered holder to purchase from the Company a unit (a "Unit") consisting of one one-hundredth of a share of Class A Preferred Stock at a purchase price of
$80 per Unit. Under the Plan, the Rights detach and become exercisable upon the earlier of (a) ten (10) days following public announcement that a person or
group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of the
Company's common stock, or (b) ten (10) business days following the commencement of, or first public announcement of the intent of a person or group to
commence, a tender offer or exchange offer that would result in a person or group beneficially owning 15% or more of such outstanding shares of the
Company's common stock. The exercise price, the kind and the number of shares covered by each right are subject to adjustment upon the occurrence of
certain events described in the Plan.

If any person or group of affiliated or associated persons acquires beneficial ownership of 15% or more of the outstanding common stock, each holder of

a Right (other than the acquiring person or group) will have the right to buy, at the exercise price, common stock of the Company having a market value of
twice the exercise price. If the Company is acquired in a merger or consolidation in which the Company is not the surviving corporation, or the Company
engages in a merger or consolidation in which the Company is the surviving corporation and the Company's common stock is changed or exchanged, or more
than 50% of the Company's assets or earning power is sold or transferred, the Rights entitle a holder (other than the acquiring person or group) to buy, at the
exercise price, stock of the acquiring company having a market value equal to twice the exercise price. At any time after a person or group of affiliated or
associated persons has acquired beneficial ownership of 15% or more of the outstanding common stock and prior to the acquisition by such person or group
of 50% or more of the outstanding common stock, the Company's Board of Directors may exchange the Rights (other than the Rights owned by such person
or group), in whole or in part, at an exchange ratio of one share of the Company's common stock, or one one-hundredth of a share of Preferred Stock, per
Right.

The Rights expire on November 11, 2012, and are redeemable upon action by the Board of Directors at a price of $0.01 per right at any time before they

become exercisable. Until the Rights become exercisable, they are evidenced only by the common stock certificates and are transferred with and only with
such certificates.

15. Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company

invests its cash and cash equivalents into high credit quality security instruments. On November 9, 2010, the Federal Deposit Insurance Corporation,
(“FDIC”) issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited
insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest bearing
transaction accounts are fully insured, regardless of the balance of the account, at all FDIC insured institutions. All other deposits which exceed $250,000,
including noninterest bearing transaction accounts prior to December 31, 2010, at each institution are not insured by the FDIC. Of the $18.0 million in cash
and cash equivalents on the Consolidated Balance Sheets at December 31, 2011, $1.2 million was not insured by the FDIC. Of the $8.1 million in cash and
cash equivalents at December 31, 2010, $3.4 million was not insured by the FDIC.

16. Business Concentration

The Company generates a significant amount of title insurance premiums in Texas and North Carolina. In 2011 and 2010, Texas accounted for 32.2%

and 3.5% of total title premiums, respectively. In 2011 and 2010, North Carolina accounted for 26.6% and 38.1% of total title premiums, respectively.

In 2011, the Company had one agent that accounted for 22.6% of net premiums written.

17. Related Party Transactions

The Company does business with, and has investments in, unconsolidated limited liability companies that are primarily title insurance agencies. The
Company utilizes the equity method to account for its investments in these limited liability companies. The following table sets forth the approximate values
by year found within each financial statement classification:

Financial Statement Classification,
Consolidated Balance Sheets
Other investments
Premium and fees receivable

Financial Statement Classification,
Consolidated Statements of Income
Net premiums written
Other income

2011
$ 2,328,000
$ 681,000

2010
$ 1,682,000
$ 739,000

2011
$ 11,004,000
$ 1,336,000

2010
$ 11,970,000
$ 1,526,000

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and
reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures
include controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and
communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of
controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases.
The Company’s disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of disclosure
controls and procedures are met.

Pursuant to Rule 13a-15(b) under the Exchange Act, an evaluation was performed under the supervision and with the participation of the

Company's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation
of the Company's disclosure controls and procedures. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were effective as of December 31, 2011 to provide reasonable
assurance that the objectives of disclosure controls and procedures are met.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2011, there were no changes in the Company's internal control over financial reporting that have

materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Management’s Assessment of Internal Control Over Financial Reporting

Management has assessed the Company’s internal control over financial reporting as of December 31, 2011. The unqualified report of

management thereon is included in Item 8 of this Annual Report on Form 10-K and incorporated by reference herein.

ITEM 9B. OTHER INFORMATION

There was no information required to be disclosed in a report on Form 8-K during the fourth quarter of the year that has not been

reported.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

PART III

The information called for by this item is incorporated by reference to the material under the captions “Proposals Requiring Your Vote –

Proposal 1 – Election of Directors” “General Information - Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate
Governance – Board of Directors and Committees – The Audit Committee” and “Corporate Governance – Code of Business Conduct and
Ethics” in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 16, 2012. Other information
with respect to the executive officers of the Company is included at the end of Part I of this Annual Report on Form 10-K under the separate
caption “Executive Officers of the Company.”

ITEM 11. EXECUTIVE COMPENSATION

The information called for by this item is set forth under the captions “Executive Compensation” and “Compensation of Directors” in the

Company's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 16, 2012 and is incorporated by
reference in this Annual Report on Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

The information pertaining to securities ownership of certain beneficial owners and management is set forth under the caption “Stock

Ownership of Certain Beneficial Owners and Management” in the Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 16, 2012 and is incorporated by reference in this Annual Report on Form 10-K.

The following table provides information about the Company’s compensation plans under which equity securities are authorized for

issuance as of December 31, 2011. The Company does not have any equity compensation plans that have not been approved by its
shareholders.

Equity Compensation Plan Information

Plan Category

Equity compensation plans approved by shareholders
Equity compensation plans not approved by shareholders
Total

Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans

101,600
-
101,600

$ 29.81
-
$ 29.81

247,000
-
247,000

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information called for by this item is set forth under the captions “Certain Relationships and Related Transactions” and “Corporate
Governance – Independent Directors” set forth in the Company's definitive Proxy Statement relating to the Annual Meeting of Shareholders
to be held on May 16, 2012 and is incorporated by reference in this Annual Report on Form 10-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information pertaining to principal accountant fees and services is set forth under the caption “Proposals Requiring Your Vote –
Proposal 2 – Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company's definitive Proxy Statement
relating to the Annual Meeting of Shareholders to be held on May 16, 2012 is incorporated by reference in this Annual Report on Form 10-K.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements.

PART IV

The following financial statements are filed under Item 8 of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm
Management’s Report on Internal Control Over Financial Reporting
Consolidated Balance Sheets as of December 31, 2011 and 2010
Consolidated Statements of Income for the Years Ended December 31, 2011 and 2010
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2011 and 2010
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2011 and 2010
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010
Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules.

All schedules are omitted, as the required information either is not applicable, is not required, or is presented in the Consolidated

Financial Statements or the notes thereto.

(a)(3) Exhibits.

The exhibits filed as a part of this report and incorporated herein by reference to other documents are listed in the Index to Exhibits

to this Annual Report on Form 10-K.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

INVESTORS TITLE COMPANY

(Registrant)

By: /s/ J. Allen Fine

J. Allen Fine, Chairman and Chief Executive
Officer (Principal Executive Officer)

March 15, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on the 15th day of March, 2012.

/s/ J. Allen Fine
J. Allen Fine, Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)

/s/ James A. Fine, Jr.
James A. Fine, Jr., President, Treasurer and
Director (Principal Financial Officer and
Principal Accounting Officer)

/s/ W. Morris Fine
W. Morris Fine, Executive Vice President,
Secretary and Director

/s/ David L. Francis
David L. Francis, Director

/s/ Richard M. Hutson, II
Richard M. Hutson, II, Director

/s/ R. Horace Johnson
R. Horace Johnson, Director

/s/ H. Joe King, Jr.
H. Joe King, Jr., Director

/s/ James R. Morton
James R. Morton, Director

/s/ James H. Speed, Jr.
James H. Speed, Jr., Director

Exhibit
Number

Description

INDEX TO EXHIBITS

3(i)

3(ii)

3(iii)

3(iv)

3(v)

3(vi)

10(i)*

10(ii)*

10(iii)*

10(iv)*

10(v)*

10(vi)*

10(vii)*

10(viii)*

10(ix)*

10(x)*

Articles of Incorporation dated January 22, 1973, incorporated by reference to Exhibit 4.1 to Form S-8 filed August 10,
2009, File No. 333-161209

Articles of Amendment to the Articles of Incorporation, dated February 8, 1973, incorporated by reference to Exhibit 4.2 to
Form S-8 filed August 10, 2009, File No. 333-161209

Articles of Amendment to Articles of Incorporation, dated May 14, 1987, incorporated by reference to Exhibit 4.3 to Form
S-8 filed August 10, 2009, File No. 333-161209

Articles of Amendment to Articles of Incorporation, incorporated by reference to Exhibit 3(iii) to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 2002, File No. 11774

Articles of Amendment to Articles of Incorporation, incorporated by reference to Exhibit 3(iv) to the Quarterly Report on
Form 10-Q for the quarter ended March 31, 2003, File No. 11774

Amended and Restated By-laws, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on
August 12, 2010, File No. 11774

Amended and Restated Rights Agreement dated August 9, 2010, incorporated by reference to Exhibit 10.1 to the
Company’s Registration Statement on Form 8-A/A (Amendment No. 1) filed on August 12, 2010, File No. 11774

1997 Stock Option and Restricted Stock Plan, incorporated by reference to Exhibit 10(viii) to Form 10-K for the year ended
December 31, 1996, File No. 11774

Form of Nonqualified Stock Option Agreement to Non-employee Directors dated May 13, 1997 under the 1997 Stock
Option and Restricted Stock Plan, incorporated by reference to Exhibit 10(ix) to Form 10-Q for the quarter ended June 30,
1997, File No. 11774

Form of Incentive Stock Option Agreement under 1997 Stock Option and Restricted Stock Plan, incorporated by reference
to Exhibit 10(xi) to Form 10-K for the year ended December 31, 1997, File No. 11774

2001 Stock Option and Restricted Stock Plan, as amended and restated effective May 17, 2006, incorporated by reference
to Exhibit 10.1 to Form 8-K filed on May 23, 2006, File No. 11774

Form of Nonqualified Stock Option Agreement under the 2001 Stock Option and Restricted Stock Plan, incorporated by
reference to Exhibit 10(i) to Form 10-Q for the quarter ended March 31, 2006, File No. 11774

Form of Nonqualified Stock Option Agreement to Non-employee Directors under the 2001 Stock Option and Restricted
Stock Plan, incorporated by reference to Exhibit 10(ii) to Form 10-Q for the quarter ended March 31, 2006, File No. 11774

Form of Incentive Stock Option Agreement under the 2001 Stock Option and Restricted Stock Plan, incorporated by
reference to Exhibit 10(iii) to Form 10-Q for the quarter ended March 31, 2006, File No. 11774

Form of Stock Appreciation Right Award Agreement under 2001 Stock Option and Restricted Stock Plan, incorporated by
reference to Exhibit 10.2 to Form 8-K filed on May 23, 2006, File No. 11774

Form of Stock Appreciation Rights Agreement under 2001 Stock Option and Restricted Stock Plan, incorporated by
reference to Exhibit 10.1 to Form 8-K filed on March 6, 2009, File No. 11774

Amended and Restated Employment Agreement effective January 1, 2009 for J. Allen Fine, incorporated by reference to
Exhibit 10(vii) to Form 10-K for the year ended December 31, 2008, File No. 11774

10(xi)*

10(xii)*

10(xiii)*

10(xiv)*

10(xv)*

10(xvi)*

10(xvii)*

10(xviii)*

10(xiv)*

31(i)

31(ii)

Amended and Restated Employment Agreement effective January 1, 2009 for James A. Fine, Jr., incorporated by reference
to Exhibit 10(viii) to Form 10-K for the year ended December 31, 2008, File No. 11774

Amended and Restated Employment Agreement effective January 1, 2009 for W. Morris Fine, incorporated by reference to
Exhibit 10(ix) to Form 10-K for the year ended December 31, 2008, File No. 11774

Amended and Restated Death Benefit Plan Agreement effective January 1, 2009 for J. Allen Fine, incorporated by
reference to Exhibit 10(x) to Form 10-K for the year ended December 31, 2008, File No. 11774

Amended and Restated Death Benefit Plan Agreement effective January 1, 2009 for James A. Fine, Jr., incorporated by
reference to Exhibit 10(xi) to Form 10-K for the year ended December 31, 2008, File No. 11774

Death Benefit Plan Agreement effective January 1, 2009 for W. Morris Fine, incorporated by reference to Exhibit 10(xii) to
Form 10-K for the year ended December 31, 2008, File No. 11774

Amended and Restated Nonqualified Deferred Compensation Plan effective January 1, 2009, incorporated by reference to
Exhibit 10(xiii) to Form 10-K for the year ended December 31, 2008, File No. 11774

Amended and Restated Nonqualified Supplemental Retirement Benefit Plan effective January 1, 2009, incorporated by
reference to Exhibit 10(xiv) to Form 10-K for the year ended December 31, 2008, File No. 11774

2009 Stock Appreciation Right Plan, incorporated by reference to Appendix A to the Company’s Proxy Statement dated
May 26, 2009, File No. 11774

Form of Stock Appreciation Rights Agreement under 2009 Stock Appreciation Right Plan, incorporated by reference to
Exhibit 10 to Form 10-Q for the quarter ended June 30, 2011, File No. 11774

Subsidiaries of Registrant, incorporated by reference to Exhibit 21 to Form 10-K for the year ended December 31, 2009,

File No. 11774

Consent of Independent Registered Public Accounting Firm filed herewith

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, filed herewith

101.INS**

XBRL Instance Document

101.SCH**

XBRL Taxonomy Extension Schema Document

101.CAL**

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**

XBRL Taxonomy Extension Label Linkbase Document

101.PRE **

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF**

XBRL Taxonomy Extension Definition Linkbase Document

Management contract or compensatory plan or arrangement

In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Annual Report on Form 10-K
shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section,
and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933,
as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

(This page intentionally left blank.)

From left to right: J. Allen Fine, Chairman, W. Morris Fine, Executive

Vice President, and James A. Fine, Jr., President.

Corporate Headquarters

121 North Columbia Street (27514) | P.O. Drawer 2687 | Chapel Hill, North Carolina 27515-2687

919.968.2200 | FAX: 919.968.2227

As we enter our fortieth year of

operations, we remain confident

in our fundamental approach.

To Our Shareholders:

In 2011, mortgage lending volume declined 19.7% and is now less than half the level it was

five years ago. Although interest rates nudged downward slightly and housing affordability

remained high, both purchase and refinance lending declined. Despite these unfavorable

market trends, we increased revenue and net income.

For the twelve-month period ended December 31, 2011, the Company reported total revenues

of $90.7 million, an increase of 27.2% from 2010. Net income increased 8.8% from 2010

to $6.9 million, and diluted earnings per share of $3.20 represented an increase of 15.1%

from 2010. Net profit margin was 7.6%.

Operational

Licensed

Annual Meeting
May 16, 2012, 11:00 a.m.
The Siena Hotel
1505 East Franklin Street
Chapel Hill, North Carolina 27514

Investors Title Company Officers

Directors

J. Allen Fine
Chief Executive Officer

J. Allen Fine
Chairman, Chief Executive Officer

James A. Fine, Jr.
President, Chief Financial Officer, Treasurer

Investor Information
Additional copies of the Company’s Annual
Report on Form 10-K can be obtained at no
charge upon written request to the Corporate
Secre tary, P.O. Drawer 2687, Chapel Hill, North
Carolina 27515-2687, or by e-mail request to
investorrelations@invtitle.com.

W. Morris Fine
Executive Vice President, Secretary

Elizabeth B. Lewter
Vice President, Assistant Secretary

L. Dawn Martin
Vice President, Assistant Secretary

Transfer Agent
First Shareholder Services
Institutional Advisory Services
FCC61
P.O. Box 29522
Raleigh, North Carolina 27626-0522

W. Morris Fine
Executive Vice President, Secretary

David L. Francis
Private Investor

Richard M. Hutson II
Attorney-at-Law

R. Horace Johnson
Private Investor

H. Joe King, Jr.
Private Investor

James R. Morton
President
TransCarolina Corporation

James H. Speed, Jr.
President, Chief Executive Officer
North Carolina Mutual Life Insurance Company

m
o
c
.
s
r
o
n
n
o
c
-
n
a
r
r
u
c
.
w
w
w
/

.
c
n

,
s
r
o
n
n
o
C
&
n
a
r
r
u
C
y
b
n
g
i
s
e
D

t
r
o
p
e
R

a
u
n
n
A

228979_C&C_Investorstitle_CVR.indd 4-6

4/9/12 4:58 PM

Going the Distance

121 North Columbia Street (27514) | P.O. Drawer 2687 Chapel Hill, North Carolina 27515-2687
919.968.2200 | FAX: 919.968.2227
www.invtitle.com

2011 Annual Report

228979_C&C_Investorstitle_CVR.indd 1-3

4/9/12 4:58 PM