10-K

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

FORM 10-K

	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2004
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number  0-11774

INVESTORS TITLE COMPANY

(Exact name of registrant as specified in its charter)

North Carolina	56-1110199
(State or other jurisdiction of  incorporation or organization)	(I.R.S. Employer       Identification No.)

121 North Columbia Street
Chapel Hill, North Carolina  27514
(919) 968-2200

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

Securities registered pursuant to section 12(g) of the Act:

Common Stock, no par value

                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    No

                Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.

                Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes    No 

The aggregate market value of the common shares held by non-affiliates was $59,365,278 based on the closing sales price on the NASDAQ National Market System on the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2004).

As of February 28, 2005, there were 2,855,744 common shares of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Investors Title Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2004 are incorporated by reference in Parts I, II and IV hereof and portions of Investors Title Company’s definitive proxy statement for the Annual Meeting of Shareholders to be held on May 18, 2005 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,” “will,” “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: (1) the demand for title insurance will vary due to factors such as interest rate fluctuations, the availability of mortgage funds, the level of real estate transactions, including mortgage refinance activity, the cost of real estate, consumer confidence, employment levels, family income levels and general economic conditions; (2) losses from claims may be greater than anticipated such that reserves for possible claims are inadequate; (3) unanticipated adverse changes in securities markets, including interest rates, could result in material losses on the Company’s investments; (4) the Company’s dependence on key management personnel, the loss of whom could have a material adverse affect on the Company’s business; (5) the Company’s ability to develop and offer products and services that meet changing industry standards in a timely and cost-effective manner and significant changes or additions to applicable government regulations; and (6) state statutes require the Company’s insurance subsidiaries to maintain minimum levels of capital, surplus and reserves and restrict the amount of dividends that the insurance subsidiaries may pay to the Company without prior regulatory approval.

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.

INVESTORS TITLE COMPANY AND SUBSIDIARIES

TABLE OF CONTENTS

PART I
ITEM 1.	BUSINESS	4
ITEM 2.	PROPERTIES	12
ITEM 3.	LEGAL PROCEEDINGS	12
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	12
ITEM 4A.	EXECUTIVE OFFICERS OF THE COMPANY	12
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	14
ITEM 6.	SELECTED FINANCIAL DATA	15
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	15
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	16
ITEM 9A.	CONTROLS AND PROCEDURES	16
ITEM 9B.	OTHER INFORMATION	16
PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	17
ITEM 11.	EXECUTIVE COMPENSATION	17
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	17
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	17
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	17
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	18
SIGNATURES		19

PART I

ITEM 1.   BUSINESS

GENERAL

                Investors Title Company (the “Company”) is a holding company that operates through its subsidiaries and was incorporated in the State of North Carolina in February 1973. The Company became operational on June 24, 1976, when it acquired Investors Title Insurance Company (“ITIC”) as a wholly owned subsidiary under a plan of exchange of shares of common stock. On September 30, 1983, the Company acquired Northeast Investors Title Insurance Company (“NE-ITIC”), formerly Investors Title Insurance Company of South Carolina, as a wholly owned subsidiary under a plan of exchange of shares of common stock. Investors Capital Management Company (“ICMC”), a wholly owned subsidiary of the Company, was organized on October 17, 2003. The Company’s most recent subsidiary, Investors Trust Company (“Investors Trust”), was granted a trust charter by the North Carolina Banking Commissioner on February 17, 2004.

                The Company engages primarily in three lines of business. The main business activity is the issuance of title insurance through ITIC and NE-ITIC. The second line of business provides tax-deferred exchange services through its subsidiaries, Investors Title Exchange Corporation (“ITEC”) and Investors Title Accommodation Corporation (“ITAC”). The Company has also recently entered into a third line of business, which it added to supplement its traditional lines of business, providing investment management and trust services to individuals, trusts and other entities. See Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 13 of Notes to Consolidated Financial Statements in the 2004 Annual Report to Shareholders incorporated by reference in this Form 10-K Annual Report for additional information related to the revenues, income and assets attributable to the Company’s operating segments.

The Company’s executive offices are located at 121 North Columbia Street, Chapel Hill, North Carolina 27514. The Company’s telephone number is (919) 968-2200, its facsimile number is (919) 968-2235, and its 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 U.S. Securities and Exchange filing. The Company makes available free of charge on its Internet website its annual report 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.

Title Insurance

Through its two wholly owned subsidiaries, ITIC and NE-ITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer and as a reinsurer for other title insurance companies. Title insurance protects against loss or damage resulting from defects that affect the title to real property. The commitment and policies issued are the standard American Land Title Association approved forms.

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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 needs to purchase an owner’s title insurance policy to protect his investment.

When real property is conveyed from one party to another, occasionally there is a hidden defect in the title or a mistake 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 a corporate guarantee against insured defects, pays all legal expenses to eliminate any title defects, pays any claims arising from errors in title examination and recording, and pays any losses arising from hidden defects in title and defects that are not of record. Title insurance provides an assurance that the insurance holder’s ownership and use of such property will be defended promptly against claims, at no cost, whether or not the claim is valid.

A title defect is one of any number of things that could jeopardize the property owner’s interest. It could be an unsatisfied mortgage, lien, judgment or other unrecorded claim against the property. It could arise through easements, use restrictions or other existing covenants, or it could be a hidden risk. Title insurance generally protects against four kinds of hidden risks — errors in the public records such as incorrect information in deeds and mortgages regarding names, signatures and legal descriptions; judgments, liens and mortgages or any other claims against the property or the seller which become the new owner’s responsibility after closing, such as unpaid taxes, assessments and other debts to creditors; claims to ownership by the spouse of a former owner or by the “missing heir” of a deceased owner who did not receive his share of the estate; and invalid deeds or other transfers by sellers who did not actually own the property or by previous owners who were minors or not mentally competent.

The Company assumes and cedes reinsurance with other insurance companies in the normal course of business. Ceded reinsurance is comprised of excess of loss treaties, which protects against losses over certain amounts.

                ITIC was incorporated in the State of North Carolina on January 28, 1972, and became licensed to write title insurance in the State of North Carolina on February 1, 1972. At present, ITIC mainly writes land title insurance both as a primary insurer and as a reinsurer throughout the eastern and midwestern United States. ITIC writes title insurance through issuing agents or branch offices in the District of Columbia and the States of Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia and Wisconsin. In addition to the states in which ITIC currently writes title insurance, it is also licensed to write title insurance in 17 additional states. Agents issue policies for ITIC and may provide other services such as search and settlement services.

                NE-ITIC was incorporated in the State of South Carolina on February 23, 1973, and became licensed to write title insurance in that state on November 1, 1973. It currently writes title insurance as a primary insurer and as a reinsurer in the State of New York. NE-ITIC is also licensed to write title insurance in North Carolina and South Carolina.

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                Each state license authorizing ITIC or NE-ITIC 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 are held and the loss of a license in any state by either company would prevent the company from issuing title insurance in that state.

                In the State of North Carolina, ITIC issues title insurance commitments and policies through its home office and its 27 branch offices that are located throughout North Carolina. The Company also has a branch office in South Carolina and Michigan. Title policies are primarily issued through issuing agents in other states.

                In the ordinary course of business, ITIC and NE-ITIC reinsure certain risks with other title insurers for the purpose of limiting their exposure. They also assume reinsurance for certain risks of other title insurers for which they receive additional income. For the last three years, reinsurance activities accounted for less than 1% of total premium volume.

                As of December 31, 2004, ITIC had a risk retention limit of $2,750,000, meaning that it assumed primary risks up to $2,750,000. It then reinsured the next $250,000 of risk with NE-ITIC, and all risks above $3,000,000 were reinsured with an unrelated reinsurer.

                As of December 31, 2004, NE-ITIC had a risk retention limit of $250,000, meaning that it assumed primary risks up to $250,000. It then reinsured the next $2,750,000 of risk with ITIC, and all amounts above $3,000,000 were reinsured with an unrelated reinsurer.

                Both ITIC’s and NE-ITIC’s risk retention limits are self-imposed and are more conservative than state insurance regulations require. ITIC’s self-imposed retention of $2,750,000 is only 15% of its statutorily permitted retention of $18,371,349. NE-ITIC’s self-imposed retention of $250,000 is only 12.3% of its statutorily permitted retention of $2,025,024.

                ITIC has been recognized by two independent Fannie Mae-approved actuarial firms, Demotech, Inc. and LACE Financial Corporation, with rating categories of “A Double Prime” and “A.” NE-ITIC’s financial stability also has been recognized by Demotech, Inc. and LACE Financial Corporation with rating categories of “A Prime” and “A+.” According to Demotech, title insurance underwriters earning a financial stability rating of A’’ (A Double Prime) or A’ (A Prime) possess unsurpassed financial stability related to maintaining positive surplus as regards policyholders, regardless of the severity of a general economic downturn or deterioration in the title insurance cycle. A LACE rating of “A+” or “A” indicates that a title insurance company has a strong overall financial condition that will allow it to meet its future claims and that, generally, the company has good operating earnings, is well capitalized and has adequate reserves.

                Exchange Services

                In 1988, the Company established Investors Title Exchange Corporation, a wholly owned subsidiary (“ITEC”), to provide services in connection with tax-deferred exchanges of like-kind property. 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.

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                The Company established South Carolina Document Preparation Company (“SCDPC”) as a wholly owned subsidiary in 1994. In the first quarter of 2001, SCDPC changed its name to Investors Title Accommodation Corporation (“ITAC”) and began serving as an exchange accommodation titleholder, offering a vehicle for accomplishing a reverse exchange when a taxpayer must acquire replacement property before selling the relinquished property.

                Investment Management and Trust Services

                The Company organized ICMC, a wholly owned subsidiary, as a North Carolina corporation on October 17, 2003. ICMC is currently licensed as an investment adviser in North Carolina and South Carolina. Investors Trust, also a wholly owned subsidiary of the Company, received its North Carolina trust charter on February 17, 2004. The Company anticipates that ICMC and Investors Trust will work together to provide investment management and trust services to individuals, companies, banks and trusts. These subsidiaries did not have significant activities in 2004, and are not currently a reportable segment for which financial information is presented in the financial statements and there is no assurance that this business will be successful.

OPERATIONS OF SUBSIDIARIES

                For a description of net premiums written geographically, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations. See Note 13 of Notes to Consolidated Financial Statements in the 2004 Annual Report to Shareholders incorporated by reference in this Form 10-K Annual Report for additional information related to the Company’s operating segments.

                Title Insurance

                ITIC and NE-ITIC issues title insurance coverage through its direct operations or through partially owned or independent title insurance agents. ITIC and NE-ITIC 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 premiums written reflect a one-time premium payment, with no recurring premiums. Premiums are recorded and 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 expense concurrently with premium recognition.

                Exchange Services

                ITEC and ITAC provide customer services in connection with tax-deferred real property exchanges pursuant to Section 1031 of the Internal Revenue Code. As a qualified intermediary, ITEC holds the proceeds from sales of relinquished properties until the acquisition of identified replacement properties occurs. ITAC facilitates tax-deferred reverse exchanges pursuant to IRS Revenue Procedure 2000-37. These exchanges require ITAC, using funds borrowed on a non-recourse basis from the customer or his lender, to acquire the designated replacement property on behalf of the customer by taking temporary title to the customer’s property until after the disposition of identified relinquished property occurs.

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SEASONALITY

                Title Insurance

                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 consumer confidence, economic conditions, supply and demand, mortgage interest rates and family income levels. Historically, the first quarter has the least real estate activity because fewer real estate transactions occur, while the remaining quarters are more active. Refinance activity is generally less seasonal, but it is subject to interest rate volatility. Fluctuations in mortgage interest rates can cause shifts in real estate activity outside of the normal seasonal pattern.

Exchange Services

                Seasonal factors affecting the level of real estate activity and the volume of title premiums written will also affect the demand for exchange services.

MARKETING

                Title Insurance

ITIC delivers title insurance coverage through a home office, branch offices, and issuing agents. In North Carolina, ITIC issues policies primarily through a home office and 27 branch offices. The Company also has a branch office in South Carolina and Michigan. ITIC also writes title insurance policies through issuing agents in the District of Columbia and the States of Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia and Wisconsin. 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.

NE-ITIC currently operates through agency offices in the State of New York.

                ITIC and NE-ITIC 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 and ITIC’s Commercial Services Division provides services to commercial clients. The Company’s marketing efforts are also enhanced through advertising in various periodicals.

                Exchange Services

                Marketing of exchange services offered by ITEC and ITAC has been increasingly incorporated into the marketing of the core title products offered by ITIC and NE-ITIC. The Commercial Services Division of ITIC also markets the services offered by ITEC and ITAC to its clients.

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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.

INSURED RISK ON POLICIES IN FORCE

                Generally, the amount of the insured risk on a title insurance policy is equal to the lesser of the purchase price of the insured property or the fair market value of the property. In the event that a claim is made against the property, the insurer is also responsible for paying all legal expenses in connection with defending the insured party and eliminating any title defects affecting the property. The insurer may, however, choose to pay the policy limits to the insured, at which time the insurer’s duty to defend the claim is satisfied.

At any given time, the insurer’s actual financial risk is only a portion of the aggregate insured risk of all policies in force. The reduction in risk results in part from the reissuance of title insurance policies by other underwriters when the property is conveyed or refinanced. An owner’s policy is effective only as long as the insured has an ownership interest in the property or has liability under warranties of title. Furthermore, the coverage on a lender’s title insurance policy is reduced and eventually terminated as the loan it secures is paid. Due to the variability of these factors, the aggregate contingent liability of the Company and its subsidiaries cannot be determined with any precision.

ENVIRONMENTAL MATTERS

                The title insurance policies ITIC and NE-ITIC currently issue exclude liability for environmental risks and contamination. Although policies issued prior to 1992 may not specifically exclude such environmental risks, they generally do not provide affirmative coverage for such risks. As a result, the Company does not anticipate that it or its subsidiaries will incur any significant expenses related to environmental claims.

                In connection with effecting 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 pursuant to which it agrees to indemnify ITEC or ITAC, as appropriate, for any environmental or other claims which may arise as a result of the arrangement.

REGULATIONS

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 other things, require insurance holding companies to register and file certain reports and require prior regulatory approval of the payment of dividends and other intercompany transfers.

9

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. 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, rates, type and amount of investments, policy forms, financial reporting, reserve requirements, and dividend restrictions, as well as examinations and audits of title insurers. The Company’s two insurance subsidiaries are subject to examination at any time by the insurance regulators in the states where they are licensed.

Proposals to change the laws and 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 and legislation, although the likelihood and timing of them and the impact they may have on the Company and its subsidiaries cannot be determined at this time.

                ITIC is domiciled in North Carolina and is subject to North Carolina insurance regulations. The North Carolina Department of Insurance typically schedules financial examinations every five years. ITIC was last examined by the North Carolina Department of Insurance for the period January 1, 1995 through December 31, 1999. No material deficiencies were noted in the report.

                NE-ITIC is domiciled in South Carolina and subject to South Carolina insurance regulations. The South Carolina Department of Insurance periodically schedules financial examinations. NE-ITIC was examined by the South Carolina Department of Insurance for the period January 1, 1998 through December 31, 2000. No material deficiencies were noted in the report.

                In addition to financial examinations, ITIC and NE-ITIC are subject to market conduct examinations by the North Carolina Department of Insurance and the South Carolina Department of Insurance, respectively. These audits examine domiciled state activity. ITIC’s last market conduct examination commenced on May 3, 2004 for the period January 1, 2001 through December 31, 2003, with no material deficiencies noted. NE-ITIC’s last market conduct examination coincided with its financial examination, which commenced in November 2001 for the period January 1, 1998 through December 31, 2000. No material deficiencies were noted for NE-ITIC by the market conduct examiners.

                Both ITIC and NE-ITIC meet the statutory premium reserve requirements and the minimum capital and surplus requirements of the states in which they are licensed.

                Exchange Services

                Intermediary services are not federally regulated and neither ITEC nor ITAC operate in any states that regulate this industry. ITEC and ITAC both provide services to taxpayers pursuant to Internal Revenue Service (“IRS”) regulations that provide 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. Periodically, changes to the tax code provisions affecting like-kind exchanges are considered, which could possibly eliminate the need for the services the exchange segment provides.

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COMPETITION    

                Title Insurance

                ITIC currently operates primarily in North Carolina, Michigan, Pennsylvania, South Carolina, Tennessee and Virginia and NE-ITIC currently operates in New York. ITIC’s and NE-ITIC’s major competitors, which together comprise a majority of the title insurance market on a national level, are Chicago Title Insurance Company, Commonwealth Land Title Insurance Company, Fidelity National Title Insurance Company, First American Title Insurance Company, Lawyers Title Insurance Corporation, Old Republic National Title Insurance Company and Stewart Title Guaranty Company. Key factors that affect competition in the title insurance industry are price, expertise, timeliness and quality of service and the financial strength and size of the insurer. Title insurance underwriters also compete for agents based upon the ratio of premium splits between the underwriter and the agent.

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.

                Exchange Services

                Competition for ITEC and ITAC comes from other title insurance companies as well as some major banks that offer exchange services. Key elements that affect competition are price, expertise, timeliness and quality of service and the financial strength and size of the company. Exchange services are not a regulated industry; therefore, there is no market data available regarding the Company’s market position in this industry.

INVESTMENTS

                The Company and its subsidiaries derive a substantial portion of their income from investments in bonds (municipal and corporate) and equity securities. The 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.

                See Note 3 of Notes to Consolidated Financial Statements in the 2004 Annual Report to Shareholders incorporated by reference in this Form 10-K Annual Report for the major categories of investments, earnings by investment categories, scheduled maturities, amortized cost, and market values of investment securities.

EMPLOYEES

                The Company has no paid employees. Officers of the Company are full-time paid employees of ITIC. The Company’s subsidiaries had 214 full-time employees and 13 part-time employees as of December 31, 2004.

                None of the employees of the Company or its subsidiaries are subject to a collective bargaining agreement. Management considers its relationship with its employees to be favorable.

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INTELLECTUAL PROPERTY

                The Company has registered two service marks with the United States Patent and Trademark Office (the “USPTO”). The first mark was registered with the USPTO on August 29, 2000 and the second mark was registered on September 12, 2000. In addition, ITIC registered a service mark with the USPTO on February 3, 1987. In the Company’s opinion, the loss of these registrations would not materially affect its business or the business of its subsidiaries.

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 serves 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 33 locations throughout North Carolina, South Carolina, Michigan, Nebraska and Tennessee. NE-ITIC leases office space in one location in New York. Each of the office facilities occupied by the Company and its subsidiaries are in good condition and adequate for present operations. In September 2004, additional space in Chapel Hill, North Carolina was leased for ITEC, ITAC, ITIC’s Commercial Services Division and ITIC’s Settlement Services Division.

ITEM 3.   LEGAL PROCEEDINGS

                The Company and its subsidiaries are involved in various 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.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2004.

ITEM 4A.  EXECUTIVE OFFICERS OF THE COMPANY  

                Following is information regarding the executive officers of the Company as of February 28, 2005. 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.

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Name	Age	Position with Registrant
J. Allen Fine	70	Chief Executive Officer and Chairman of the Board
James A. Fine, Jr.	42	President, Treasurer, Chief Financial Officer, Chief Accounting Officer and Director
W. Morris Fine	38	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., President, Treasurer and Director of the Company, and W. Morris Fine, Executive Vice President, Secretary and Director of the Company.

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. He is the son of J. Allen Fine, Chief Executive Officer and Chairman of the Board of the Company, and the brother of W. Morris Fine, Executive Vice President, Secretary and Director of the Company.

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, Chief Executive Officer and Chairman of the Board of the Company, and the brother of James A. Fine, Jr., President, Treasurer and Director of the Company.

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PART II

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

                The high and low sales prices for the Company’s common stock, as reported on the NASDAQ National Market System, the dividends paid per common share for each quarter in the last two fiscal years and the approximate number of shareholders of record are set forth under the caption “Common Stock Data” in the 2004 Annual Report to Shareholders and are incorporated by reference in this Form 10-K Annual Report. For a discussion of factors that may limit the Company’s ability to pay dividends on its common stock, refer to the subsection of Management’s Discussion and Analysis of Financial Condition and Results of Operations entitled “Liquidity and Capital Resources” in the 2004 Annual Report to Shareholders, incorporated by reference in this Form 10-K Annual Report.

                The following table provides information about the Company’s compensation plans under which equity securities are authorized for issuance as of December 31, 2004. The Company does not have any equity compensation plans that have not been approved by its shareholders.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted Average Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by shareholders	246,781	$  16.45	196,300
Equity compensation plans not approved by shareholders	—	—	—
Total	246,781	$  16.45	196,300

                The following table provides information about purchases by the Company (and all affiliated purchasers) during the quarter ended December 31, 2004 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act: 

Issuer Purchases of Equity Securities

Period	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
Beginning of period					505,855
10/01/04 - 10/31/04	2,052	$	31.30	2,052	503,803
11/01/04 - 11/30/04	236	$	33.87	236	503,567
12/01/04 - 12/31/04	8,695	$	34.81	8,695	494,872
Total:	10,983	$	34.13	10,983	494,872

14

(1)	For the quarter ended December 31, 2004, ITIC purchased an aggregate of 10,983 shares of the Company’s common stock pursuant to the purchase plan (the “Plan”) that was publicly announced on June 5, 2000.
(2)	On June 5, 2000, the Board of Directors of ITIC approved the purchase by ITIC of up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the Plan. Subsequently, the Board of Directors of ITIC approved the purchase of an additional 125,000 shares of the Company’s common stock pursuant to the Plan. Unless terminated earlier by resolution of the Board of Directors of ITIC, the Plan will expire when ITIC has purchased all shares authorized for purchase thereunder.
(3)	ITIC intends to make further purchases under this Plan.

ITEM 6.   SELECTED FINANCIAL DATA

                The selected financial data for the last five fiscal years of the Company and its subsidiaries is set forth under the caption “Financial Highlights” in the 2004 Annual Report to Shareholders and is incorporated by reference in this Form 10-K Annual Report. The information should be read in conjunction with the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2004 Annual Report to Shareholders, which are incorporated by reference in this Form 10-K Annual Report.

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

                Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2004 Annual Report to Shareholders is incorporated by reference in this Form 10-K Annual Report.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

                The subsection entitled “Quantitative and Qualitative Disclosures about Market Risk” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2004 Annual Report to Shareholders is incorporated by reference in this Form 10-K Annual Report.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                The financial statements and supplementary data in the 2004 Annual Report to Shareholders are incorporated by reference in this Form 10-K Annual Report.

                The financial statements meeting the requirements of Regulation S-X are attached hereto as Schedules I, II, III, IV and V.

                The supplementary financial information set forth in the section entitled “Selected Quarterly Financial Data” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2004 Annual Report to Shareholders is incorporated by reference in this Form 10-K Annual Report.

15

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

                No reportable item.

ITEM 9A.   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 “Act”) was recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms. 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 pursuant to Rule 13a-15(e) under the Act. 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, 2004. In reaching this conclusion, the Company’s Chief Executive Officer and Chief Financial Officer determined that the Company’s disclosure controls and procedures were effective in ensuring that such information was accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

                During the quarter ended December 31, 2004, there was no change in the Company’s internal control over financial reporting identified in connection with the above-referenced evaluation that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

16

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                Information pertaining to Directors of the Company under the heading “Election of Directors” in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 18, 2005 is incorporated by reference in this Form 10-K Annual Report. Other information with respect to executive officers is contained in Part I - Item 4(a) under the caption “Executive Officers of the Company”.

                The Company has adopted a written Code of Business Conduct and Ethics that applies to all officers, directors and employees of the Company and its subsidiaries. The Code of Business Conduct and Ethics can be found on the Company’s website at www.invtitle.com. The Company intends to make all required disclosures concerning any amendments to, or waivers from, the Code of Business Conduct and Ethics on its website.

ITEM 11.   EXECUTIVE COMPENSATION

                Information set forth under the headings “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in the Company’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 18, 2005 is incorporated by reference in this Form 10-K Annual Report.

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

                Information pertaining to securities ownership of certain beneficial owners and management under the heading “Stock Ownership of Executive Officers and Certain Beneficial Owners” in the Company’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 18, 2005 is incorporated by reference in this Form 10-K Annual Report.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information set forth under the heading “Executive Employment Agreements” in the Company’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 18, 2005 is incorporated by reference in this Form 10-K Annual Report.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

                Information pertaining to principal accountant fees and services under the heading “Independent Auditor Audit and Non-Audit Fees” in the Company’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 18, 2005 is incorporated by reference in this Form 10-K Annual Report.

17

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)	Financial Statements.
	The following financial statements in the 2004 Annual Report to Shareholders are hereby incorporated
by reference in this Form 10-K Annual Report:
	Consolidated Balance Sheets as of December 31, 2004 and 2003
	Consolidated Statements of Income for the Years Ended December 31, 2004, 2003 and 2002
	Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2004, 2003 and 2002
	Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2004, 2003 and 2002
	Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002
	Notes to Consolidated Financial Statements
	Report of Independent Auditors
(a)(2)	Financial Statement Schedules.
	Following is a list of financial statement schedules filed as part of this Form 10-K Annual Report:

Schedule Number	Description
I	Summary of Investments - Other Than Investments in Related Parties
II	Condensed Financial Information of Registrant
III	Supplementary Insurance Information
IV	Reinsurance
V	Valuation and Qualifying Accounts

All other 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.

18

SIGNATURES

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.

INVESTORS TITLE COMPANY
(Registrant)
	By:	/s/ J. Allen Fine
		———————————————————
		J. Allen Fine, Chairman and Chief Executive
		Officer (Principal Executive Officer)

March 16, 2005

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 16th day of March, 2005.

/s/ J. Allen Fine
———————————————————	————————————————
J. Allen Fine, Chairman of the Board and	James R. Morton, Director
Chief Executive Officer
(Principal Executive Officer)
/s/ James A. Fine, Jr.	/s/ A. Scott Parker III
———————————————————	————————————————
James A. Fine, Jr., President, Treasurer and	A. Scott Parker III, Director
Director (Principal Financial Officer and
Principal Accounting Officer)
/s/ W. Morris Fine	/s/ H. Joe King, Jr.
———————————————————	————————————————
W. Morris Fine, Executive Vice President,	H. Joe King, Jr., Director
Secretary and Director
/s/ David L. Francis	/s/ William J. Kennedy III
———————————————————	————————————————
David L. Francis, Director	William J. Kennedy III, Director
/s/ Loren B. Harrell, Jr.
———————————————————
Loren B. Harrell, Jr., Director

19

SCHEDULE I
INVESTORS TITLE COMPANY AND SUBSIDIARIES SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES As of December 31, 2004
Type of Investment	Cost(1)		Market Value		Amount at which shown in the Balance Sheet (2)
Fixed Maturities:
Bonds:
States, municipalities and political       subdivisions	$	65,034,361	$	66,617,609	$	66,490,115
Public utilities		199,662		216,346		216,346
All other corporate bonds		7,339,755		7,967,940		7,967,940
Short term investments		9,106,643		9,106,643		9,106,643
Certificates of deposit		1,027,678		1,027,678		1,027,678
Total fixed maturities		82,708,099		84,936,216		84,808,722
Equity Securities:
Common Stocks:
Public utilities		143,440		196,350		196,350
Banks, trust and insurance companies		70,991		442,590		442,590
Industrial, miscellaneous and all other		3,334,183		5,506,916		5,506,916
Nonredeemable preferred stocks		893,690		1,094,450		1,094,450
Total equity securities		4,442,304		7,240,306		7,240,306
Other Investments		1,211,517				1,211,517
Total investments per the consolidated balance sheet	$	88,361,920			$	93,260,545

(1)	Fixed maturities are shown at amortized cost and equity securities are shown at original cost.
(2)	Bonds of states, municipalities and political subdivisions are shown at amortized cost for held-to-maturity bonds and fair value for available-for-sale bonds. Equity securities are shown at fair value.

SCHEDULE II

INVESTORS TITLE COMPANY (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2003

	2004		2003
Assets
Cash and cash equivalents	$	207,849	$	121,587
Investments in fixed maturities, available-for-sale		8,956,400		773,483
Investments in equity securities		—		2,030,000
Short term investments		1,012,182		2,494,742
Investments in affiliated companies		58,936,521		52,597,051
Other investments		819,936		829,123
Other receivables		237,798		1,756,867
Deferred income taxes, net		33,189		62,046
Income taxes receivable		2,123,917		1,327,456
Prepaid expenses and other assets		45,713		16,927
Property, net		2,085,822		2,108,948
Total Assets	$	74,459,327	$	64,118,230
Liabilities and Stockholders’ Equity Liabilities:
Accounts payable and accrued liabilities	$	1,952,056	$	929,484
Stockholders’ Equity:
Class A Junior Participating preferred stock - no par value     (shares authorized 100,000; no shares issued)		—		—
Common stock-no par (shares authorized 10,000,000; 2,481,024     and 2,503,923 shares issued and outstanding 2004 and 2003,     respectively, excluding 374,720 and 351,821 shares 2004 and     2003, respectively, of common stock held by the Company’s subsidiary)		1		1
Retained earnings		69,272,092		59,756,927
Accumulated other comprehensive income      (net of deferred taxes: 2004: $1,663,447; 2003: $1,768,477)		3,235,178		3,431,818
Total stockholders’ equity		72,507,271		63,188,746
Total Liabilities and Stockholders’ Equity	$	74,459,327	$	64,118,230

See notes to condensed financial statements.

SCHEDULE II

INVESTORS TITLE COMPANY (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

	2004			2003		2002
Revenues:
Investment income-interest and dividends	$	124,421		$	96,952	$	91,619
Net realized loss on sales of investments		(12,500	)		—		—
Rental income		519,991			503,031		516,018
Miscellaneous income		69,274			11,000		5,017
Total		701,186			610,983		612,654
Operating Expenses:
Office occupancy and operations		285,903			242,861		247,244
Business development		42,953			31,098		24,077
Taxes-other than payroll and income		75,649			65,461		61,107
Professional fees		60,161			52,758		63,490
Other expenses		59,738			47,635		45,332
Total		524,404			439,813		441,250
Equity in Net Income of Affiliated Cos.*		10,583,384			10,850,844		7,991,438
Income Before Income Taxes		10,760,166			11,022,014		8,162,842
Provision for Income Taxes		41,000			57,000		54,000
Net Income	$	10,719,166		$	10,965,014	$	8,108,842
Basic Earnings per Common Share	$	4.29		$	4.38	$	3.22
Weighted Average Shares Outstanding-Basic		2,496,711			2,503,659		2,517,328
Diluted Earnings Per Common Share	$	4.09		$	4.18	$	3.12
Weighted Average Shares Outstanding-Diluted		2,620,916			2,624,473		2,597,979

* Eliminated in consolidation

See notes to condensed financial statements.

SCHEDULE II

INVESTORS TITLE COMPANY (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

	2004			2003			2002
Operating Activities:
Net income	$	10,719,166		$	10,965,014		$	8,108,842
Adjustments to reconcile net income to net cash provided      by operating activities:
Equity in net earnings of subsidiaries		(10,583,384	)		(10,850,843	)		(7,991,439	)
Depreciation		73,452			70,944			72,467
Amortization, net		5,719			10,601			11,977
Net gain on disposals of property		—			—			(532	)
Net realized loss on sales of investments		12,500			—			—
Provision (benefit) for deferred income taxes		59,000			(12,000	)		(6,000	)
(Increase) decrease in receivables		1,519,069			(1,446,089	)		4,567
Increase in income taxes receivable-current		(796,461	)		(1,327,456	)		—
(Increase) decrease in prepaid expenses		(28,786	)		2,714			32,884
Increase (decrease) in accounts payable and accrued liabilities		(5,357	)		454,097			138,300
Decrease in income taxes payable-current		—			(232,325	)		(157,772	)
Net cash provided by (used in) operating activities		974,918			(2,365,343	)		213,294
Investing Activities:
Capital contribution to subsidiaries		(1,783,000	)		(325,000	)		—
Dividends received from subsidiaries		5,050,819			3,782,400			3,177,772
Purchases of available-for-sale securities		(19,518,900	)		(2,000,000	)		—
Purchases of short term securities		(1,012,182	)		—			(3,599,095	)
Purchases of and net earnings from other investments		—			(486,000	)		(385,195	)
Proceeds from sales and maturities of available-for-sale securities		13,267,500			250,000			597,962
Proceeds from sales of short term securities		2,494,742			1,486,879			—
Proceeds from sales and distributions from other investments		9,187			42,072			—
Purchases of property		(50,326	)		(105,048	)		(8,157	)
Proceeds from sales of property		—			—			10,000
Net change in pending trades		1,027,929			—			—
Net cash provided by (used in) investing activities		(514,231	)		2,645,303			(206,713	)
Financing Activities:
Dividends paid (net dividends paid to subsidiary of $53,936 in          2004 and $42,278 in 2003)		(374,425	)		(300,411	)		(300,557	)
Net cash used in financing activities		(374,425	)		(300,411	)		(300,557	)
Net Increase (Decrease) in Cash and Cash Equivalents		86,262			(20,451	)		(293,976	)
Cash and Cash Equivalents, Beginning of Year		121,587			142,038			436,014
Cash and Cash Equivalents, End of Year	$	207,849		$	121,587		$	142,038
Supplemental Disclosures:
Cash Paid During the Year For:
Income Taxes	$	781,000		$	1,639,000		$	218,000

See notes to condensed financial statements.

SCHEDULE II

INVESTORS TITLE COMPANY (PARENT COMPANY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS

1. The accompanying condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto of Investors Title Company and Subsidiaries.

2. Cash dividends paid to Investors Title Company by its wholly owned subsidiary were as follows:

Subsidiaries	2004	2003	2002
Investors Title Insurance Company, net *	$3,950,819	$3,307,400	$2,857,772
Investors Title Exchange Corporation	1,100,000	175,000	160,000
Investors Title Accommodation Corporation	-	100,000	100,000
Investors Title Management Services, Inc.	-	200,000	60,000
	$ 5,050,819	$ 3,782,400	$ 3,177,772

*Total dividends of $4,004,755 and $3,349,678 paid to the Parent Company in 2004 and 2003, respectively, netted with dividends of $53,936 and $42,278 received from the Parent in 2004 and 2003, respectively.

SCHEDULE III

INVESTORS TITLE COMPANY AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
For the Years Ended December 31, 2004, 2003 and 2002

Segment	Deferred Policy Acquisition Cost	Future Policy Benefits, Losses, Claims and Loss Expenses		Unearned Premiums	Other Policy Claims and Benefits Payable		Premium Revenue		Net Investment Income		Benefits Claims, Losses and Settlement Expenses		Amortization of Deferred Policy Acquisition Costs	Other Operating Expenses		Premiums Written
Year Ended
December 31, 2004
Title Insurance	—	$	31,842,000	—	$	551,662	$	71,775,157	$	2,597,355	$	7,984,339	—	$	53,456,152	N/A
Exchange Services	—		—	—		—		—		7,821		—	—		640,183	N/A
All Other	—		—	—		—		—		147,662		—	—		2,258,336	N/A
	—	$	31,842,000	—	$	551,662	$	71,775,157	$	2,752,838	$	7,984,339	—	$	56,354,671
Year Ended
December 31, 2003
Title Insurance	—	$	30,031,000	—	$	726,191	$	83,927,312	$	2,589,228	$	9,292,739	—	$	63,495,050	N/A
Exchange Services	—		—	—		—		—		2,818		—	—		495,119	N/A
All Other	—		—	—		—		—		99,641		—	—		1,375,949	N/A
	—	$	30,031,000	—	$	726,191	$	83,927,312	$	2,691,687	$	9,292,739	—	$	65,366,118
Year Ended
December 31, 2002
Title Insurance	—	$	25,630,000	—	$	401,040	$	67,298,617	$	2,706,887	$	6,871,822	—	$	52,772,680	N/A
Exchange Services	—		—	—		—		—		6,114		—	—		441,386	N/A
All Other	—		—	—		—		—		93,807		—	—		1,097,610	N/A
	—	$	25,630,000	—	$	401,040	$	67,298,617	$	2,806,808	$	6,871,822	—	$	54,311,676

SCHEDULE IV

INVESTORS TITLE COMPANY AND SUBSIDIARIES
REINSURANCE
For the Years Ended December 31, 2004, 2003 and 2002

	Gross Amount		Ceded to Other Companies			Assumed from Other Companies	Net Amount		Percentage of Amount Assumed to Net
YEAR ENDED
DECEMBER 31, 2004
Title Insurance	$	72,063,833	$	294,639	$	5,963	$	71,775,157	0.01	%
YEAR ENDED
DECEMBER 31, 2003
Title Insurance	$	84,359,310	$	438,229	$	6,231	$	83,927,312	0.01	%
YEAR ENDED
DECEMBER 31, 2002
Title Insurance	$	67,626,272	$	348,395	$	20,740	$	67,298,617	0.03	%

SCHEDULE V

INVESTORS TITLE COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2004, 2003 and 2002

Description	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Additions Charged to Other Accounts - Describe		Deductions- describe*			Balance at End of Period
2004
Premiums Receivable Valuation Provision	$	2,474,000	$	5,745,114	$	—	$	(5,979,114	)	$	2,240,000
Reserves for Claims	$	30,031,000	$	7,984,339	$	—	$	(6,173,339	)	$	31,842,000
2003
Premiums Receivable Valuation Provision	$	1,800,000	$	5,477,324	$	—	$	(4,803,324	)	$	2,474,000
Reserves for Claims	$	25,630,000	$	9,292,739	$	—	$	(4,891,739	)	$	30,031,000
2002
Premiums Receivable Valuation Provision	$	1,405,000	$	4,600,806	$	—	$	(4,205,806	)	$	1,800,000
Reserves for Claims	$	21,460,000	$	6,871,822	$	—	$	(2,701,822	)	$	25,630,000

*Cancelled premiums and change in allowance for bad debts

*Payments of claims, net of recoveries

INDEX TO EXHIBITS

Exhibit Number	Description
3(i)	Articles of Incorporation dated January 22, 1973, incorporated by reference to Exhibit 1 to Form 10 dated June 12, 1984
3(ii)	Bylaws – Restated and Amended as of May 21, 2003, incorporated by reference to Exhibit 3(ii) to Form 10-K for the year ended December 31, 2003
4	Rights Agreement, dated as of November 12, 2002, between Investors Title Company and Central Carolina Bank, a division of National Bank of Commerce, incorporated by reference to Exhibit 1 to Form 8-A filed November 15, 2002
10(i)	1993 Incentive Stock Option Plan, incorporated by reference to Exhibit 10 to Form 10-K for the year ended December 31, 1993

10(ii)	Form of Incentive Stock Option Agreement under 1993 Incentive Stock Option Plan, incorporated by reference to Exhibit 10(v) to Form 10-K for the year ended December 31, 1994
10(iii)	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
10(iv)	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
10(v)	Form of Nonqualified Stock Option Agreement under 1997 Stock Option and Restricted Stock Plan, incorporated by reference to Exhibit 10(x) to Form 10-K for the year ended December 31, 1997
10(vi)	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
10(vii)	Form of Amendment to Incentive Stock Option Agreement between Investors Title Company and James Allen Fine, James Allen Fine, Jr., William Morris Fine, George Abbitt Snead, Ralph Nichols Strayhorn, III and Raeford Wilder Wall, Jr., respectively, incorporated by reference to Exhibit 10(xii) to Form 10-Q for the quarter ended June 30, 2000
10(viii)	2001 Stock Option and Restricted Stock Plan, incorporated by reference to Exhibit 10(xiii) to Form 10-K for the year ended December 31, 2000
10(ix)	Form of Employment Agreement dated November 17, 2003 with each of J. Allen Fine, James A. Fine, Jr. and W. Morris Fine, incorporated by reference to Exhibit 10(ix) to Form 10-K for the year ended December 31, 2003

10(x)	Amended and Restated Employment Agreement dated June 1, 2004 with J. Allen Fine, incorporated by reference to Exhibit 10(x) to Form 10-Q for the quarter ended June 30, 2004
10(xi)	Form of Amended and Restated Employment Agreement dated June 1, 2004 with each of James A. Fine, Jr. and W. Morris Fine, incorporated by reference to Exhibit 10(xi) to Form 10-Q for the quarter ended June 30, 2004
10(xii)	Nonqualified Deferred Compensation Plan dated June 1, 2004, incorporated by reference to Exhibit 10(xii) to Form 10-Q for the quarter ended June 30, 2004
10(xiii)	Nonqualified Supplemental Retirement Benefit Plan dated November 17, 2003, incorporated by reference to Exhibit 10(xiii) to Form 10-Q for the quarter ended June 30, 2004
10(xiv)	Death Benefit Plan Agreement dated April 1, 2004 with J. Allen Fine, incorporated by reference to Exhibit 10(xiv) to Form 10-Q for the quarter ended June 30, 2004
10(xv)	Death Benefit Plan Agreement dated May 19, 2004 with James A. Fine, Jr., incorporated by reference to Exhibit 10(xv) to Form 10-Q for the quarter ended June 30, 2004
13	Portions of 2004 Annual Report to Shareholders incorporated by reference in this report as set forth in Parts I, II and IV hereof
14	Code of Business Conduct and Ethics, incorporated by reference to Exhibit 14 to Form 10-K for the year ended December 31, 2003

16	Letter regarding Change in Certifying Accountant, incorporated by reference to Exhibit 16 to Form 8-K dated September 24, 2004
21	Subsidiaries of Registrant, incorporated by reference to Exhibit 21 to Form 10-K for the year ended December 31, 2003
23 (a)	Consent of Dixon Hughes PLLC
23 (b)	Consent of Deloitte & Touche LLP
31(i)	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(ii)	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-13

Exhibit 13

Common Stock Data

The Common Stock of the Company is traded under the symbol “ITIC” in the over-the-counter market and is quoted on the National Market System of the National Association of Securities Dealers Automated Quotation System (“NASDAQ”). The number of record holders of common stock at December 31, 2004 was 549. 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 names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depository trust companies. The following table shows the high and low sales prices reported on the NASDAQ National Market System.

	2004					2003
		High		Low		High		Low
First Quarter	$	35.30	$	30.29	$	24.19	$	18.00
Second Quarter	$	32.47	$	25.10	$	31.00	$	20.50
Third Quarter	$	32.10	$	28.01	$	31.50	$	24.30
Fourth Quarter	$	37.00	$	29.40	$	31.17	$	29.55

The Company paid cash dividends of $.03 per share during the first quarter of 2004 and $.04 per share during each of the second, third and fourth quarters of 2004. The Company paid cash dividends of $.03 per share in each of the four quarters during 2003.

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 payment of dividends is subject to the restrictions described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Liquidity and Capital Resources.”

Market Makers for 2004
The Archipelago Exchange	Ferris Baker Watts Inc.	Knight Equity Markets, LP
Boston Stock Exchange	GVR Company LLC	National Stock Exchange
Conifer Securities LLC	Hill, Thompson, Magid and Co.	Schwab Capital Markets
Davenport & Company LLC

Financial Highlights
For the Year	2004			2003			2002			2001			2000
Net premiums written	$	71,775,157		$	83,927,312		$	67,298,617		$	58,800,545		$	37,740,752
Revenues		79,841,176			90,829,871			72,852,340			63,792,445			42,279,768
Investment income		2,752,838			2,691,687			2,806,808			2,740,280			2,528,143
Net income		10,719,166			10,965,014			8,108,842			6,008,998			3,140,463
Per Share Data
Basic earnings per   common share	$	4.29		$	4.38		$	3.22		$	2.35		$	1.21
Weighted average shares   outstanding—Basic		2,496,711			2,503,659			2,517,328			2,554,204			2,594,891
Diluted earnings per   common share	$	4.09		$	4.18		$	3.12		$	2.31		$	1.21
Weighted average shares   outstanding—Diluted		2,620,916			2,624,473			2,597,979			2,599,714			2,601,283
Cash dividends per share	$	.15		$	.12		$	.12		$	.12		$	.12
At Year End
Assets	$	113,186,752		$	100,471,811		$	84,637,146		$	70,219,700		$	59,339,007
Investments in securities		93,260,545			79,842,183			65,336,439			53,471,697			45,229,576
Stockholders’ equity		72,507,271			63,188,746			52,668,184			44,271,768			39,189,649
Book value/share		29.22			25.24			20.93			17.59			15.27
Performance Ratios
Net income to:
Average stockholders’ equity		15.80	%		18.93	%		16.73	%		14.40	%		8.19	%
Total revenues (profit margin)		13.43	%		12.07	%		11.13	%		9.42	%		7.43	%

Investors Title Company and Subsidiaries

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

Title Insurance:   Investors Title Company (the “Company”) engages primarily in two segments of business. Its dominant business activity is the issuance of title insurance through two subsidiaries, Investors Title Insurance Company (“ITIC”) and Northeast Investors Title Insurance Company (“NE-ITIC”), which accounted for 94.5% of the Company’s operating revenues in 2004. Through ITIC and NE-ITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer and as a reinsurer for other title insurance companies. Title insurance protects against loss or damage resulting from defects that affect the title to real property. The commitment and policies issued are predominantly the standard American Land Title Association approved forms.

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 a hidden defect in the title or a mistake 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 a corporate guarantee against insured defects, pays all legal expenses to eliminate any title defects, pays any claims arising from errors in title examination and recording, and pays any losses arising from hidden defects in title and defects that are not of record. Title insurance provides an assurance that the insurance holder’s ownership and use of such property will be defended promptly against claims, at no cost, whether or not the claim is valid.

ITIC delivers title insurance coverage through a home office, branch offices, and issuing agents. In North Carolina, ITIC issues policies primarily through a home office and 27 branch offices. The Company also has a branch office in South Carolina and Michigan. 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.

The Company’s overall level of premiums written is affected by a number of factors, including the level of interest rates, the availability of mortgage funds, the level of real estate transactions and mortgage refinance activity, the cost of real estate, employment levels, family income levels and general economic conditions. Generally, real estate activity declines as a result of higher interest rates or an economic downturn, thus leading to a corresponding decline in title insurance premiums written and profitability of the Company. The cyclical nature of the land title insurance industry has historically caused fluctuations in revenues and profitability and it is expected to continue to do so in the future. Revenues for this segment result from refinance activity, purchases of new and existing residential and commercial real estate and certain other types of mortgage lending such as home equity lines of credit.

Volume is a key factor in the Company’s profitability due to the existence of significant fixed costs such as personnel and occupancy expenses associated with the support of the issuance of title insurance policies and of general corporate operations. These expenses will be incurred by the Company regardless of the level of premiums written. The resulting operating leverage has historically tended to amplify the impact of changes in volume on the Company’s profitability.

Exchange Services:  The Company’s second segment provides customer services in connection with tax-deferred real property exchanges through its subsidiaries, Investors Title Exchange Corporation (“ITEC”) and Investors Title Accommodation Corporation (“ITAC”). ITEC serves as a qualified intermediary in §1031 like-kind exchanges of real or personal property. In its role as qualified intermediary, ITEC coordinates the exchange aspects of the real estate transaction with the closing agents. ITEC’s 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. As exchange accommodation titleholder, ITAC offers a vehicle for accommodating a reverse exchange when the taxpayer must acquire replacement property before selling the relinquished property.

Factors that influence the title insurance industry will also generally affect the exchange services industry. In addition, the services provided by our exchange services are pursuant to provisions in the Internal Revenue Code. From time to time, these exchange provisions are subject to review and proposed changes. Any future change in the code could materially impact the exchange segment, including possibly eliminating the need for the services these subsidiaries offer.

New Services:  In 2003, the Company formed two new subsidiaries, Investors Title Commercial Agency, LLC (“ITCA”) and Investors Capital Management Company (“ICMC”), to supplement its traditional lines of business. ITCA  primarily underwrites large commercial title insurance policies, thus providing the Company with another vehicle for expanding its presence in the title insurance industry. In conjunction

with Investors Trust Company, which was chartered on February 17, 2004, ICMC provides investment management and trust services to individuals, companies, banks and trusts.

Operating Results:  As noted above, the title insurance business is closely related to the overall level of real estate activity, and title insurance volumes generally fluctuate based on the effect changes in interest rates have on the level of real estate activity. In the first quarter of 2004, operating results continued to be driven by a relatively low interest rate environment. In the second quarter of 2004, average mortgage interest rates increased, causing a reduction in the demand for mortgage refinancing. In the third quarter of 2004, the decline in premiums written can be primarily attributed to the decreases in mortgage refinance transactions. In the fourth quarter, premiums written continued to be impacted by the decrease in national mortgage refinance volume from levels set in 2003. According to data published by Freddie Mac, the annual average thirty-year fixed mortgage interest rates in the United States were reported to be 5.84 %, 5.83% and 6.54% in 2004, 2003 and 2002, respectively.

During 2004, the quarterly average thirty-year fixed mortgage interest rates were 5.60%, 6.13%, 5.89% and 5.73% for the first, second, third and fourth quarters, respectively. Total refinancing volume in the United States for 2004 was approximately $1.26 trillion, which was $1.27 trillion less than the preceding year according to the Mortgage Bankers Association of America.

In recent years, the Company and the title insurance industry have experienced significant increases in premiums written related to increases in mortgage refinancing. This refinancing activity has been driven by declining interest rates. To the extent interest rates stay the same or increase going forward, mortgage refinancing is generally expected to decline from current levels. Operating results for the years ended 2003 and 2004, therefore, should not be viewed as indicative of the Company’s future operating results. The Company continues to monitor and strives to manage operating expenses such as salaries, employee benefits and other operational expenses with knowledge of the potential for further declines in title insurance revenues if interest rates continue to rise or the economy slows.

Credit Rating

ITIC has been recognized by two independent Fannie Mae-approved actuarial firms, Demotech, Inc. and LACE Financial Corporation, with rating categories of “A Double Prime” and “A.” NE-ITIC’s financial stability also has been recognized by Demotech, Inc. and LACE Financial Corporation with rating categories of “A Prime” and “A+.” According to Demotech, title insurance underwriters earning a financial stability rating of A’’ (A Double Prime) or A’ (A Prime) possess unsurpassed financial stability related to maintaining positive surplus as regards policyholders, regardless of the severity of a general economic downturn or deterioration in the title insurance cycle. A LACE rating of “A+” or “A” indicates that a title insurance company has a strong overall financial condition that will allow it to meet its future claims and that, generally, the company has good operating earnings, is well capitalized and has adequate reserves. Since ITIC’s and NE-ITIC’s ratings are either at the highest rank or next-to-highest rank, any increase in such ratings would have a negligible impact on the business or finances of the Company. A significant decline in these ratings may, among other things, lead to a decrease in the Company’s stock price, the loss of certain licenses ITIC and NE-ITIC need to operate as title insurance companies in various states and the Company’s ability to maintain strong relationships with its customers and agents.

Results of Operations
Operating Revenues

Operating revenues include premiums written and reinsurance assumed, net of reinsurance ceded (net premiums written) plus fee income as well as gains and losses on the disposal of fixed assets. Investment income and realized gains/losses are not included in operating revenues for the purpose of this summary schedule. Following is a summary by segment of the Company’s operating revenues. Intersegment eliminations have been netted with each segment; therefore, the individual segment amounts will not agree to Note 13 in the accompanying Consolidated Financial Statements.

	2004				2003				2002
Title insurance	$	72,750,874	94.5	%	$	85,505,899	97.3	%	$	68,144,235	97.7	%
Exchange services		2,801,888	3.6	%		1,245,234	1.4	%		947,426	1.3	%
All other		1,441,920	1.9	%		1,128,333	1.3	%		674,570	1.0	%
	$	76,994,682	100	%	$	87,879,466	100	%	$	69,766,231	100	%

Title Insurance

Net Premiums: Net premiums written decreased 14.5% in 2004 over 2003 and increased 24.7% in 2003 over 2002. During 2004, revenues were primarily impacted by the decline in premiums written due to lower levels of mortgage refinancing activity compared with the prior year, as a result of higher mortgage interest rates. This decrease reflects the decline in the volume of policies and commitments issued in 2004. The

increase in premiums written in 2003 from 2002 was due to continued low mortgage interest rates throughout the year, which led to continued strength in the refinance market as well as expansion through agents into new markets and greater penetration in existing markets.

Policies and Commitments:  The volume of business decreased in 2004, as 283,696 policies and commitments were issued in 2004, which is a decrease of 29% compared with 397,638 policies and commitments issued in 2003. The decrease in volume was primarily attributable to the decline in refinancing activity from 2003, as noted above. In 2003, the number of policies and commitments issued increased by 22% compared with 325,918 issued in 2002.

Shown below is a schedule of net premiums written for 2004, 2003 and 2002 in all states where ITIC and NE-ITIC currently underwrite title insurance:

State	2004			2003			2002
Alabama	$	1,361,437		$	1,286,681		$	654,345
Florida		1,190,399			392,602			1,745
Illinois		948,022			1,219,212			57,758
Kentucky		1,710,387			1,800,258			1,282,772
Maryland		1,494,686			1,707,678			1,428,140
Michigan		4,896,239			7,230,906			9,492,665
Minnesota		1,063,819			2,186,522			1,180,153
Mississippi		990,203			1,092,772			1,011,538
Nebraska		783,398			1,777,174			1,348,139
New York		3,495,587			5,605,642			3,911,191
North Carolina		32,446,835			31,102,294			24,112,712
Pennsylvania		2,634,407			5,838,436			4,462,864
South Carolina		6,464,495			7,512,259			5,638,718
Tennessee		2,954,957			3,686,677			3,239,109
Virginia		7,038,474			9,101,185			7,577,229
West Virginia		1,864,216			2,025,557			1,638,306
Other States		726,272			793,455			588,888
Direct Premiums		72,063,833			84,359,310			67,626,272
Reinsurance Assumed		5,963			6,231			20,740
Reinsurance Ceded		(294,639	)		(438,229	)		(348,395	)
Net Premiums Written	$	71,775,157		$	83,927,312		$	67,298,617

As noted above, the overall decline in total premiums written was due primarily to lower mortgage refinancing activity compared with 2003. Premiums written in Minnesota, Nebraska, New York and Pennsylvania were also impacted by declining business in individual agencies in those states. Year to date premiums in North Carolina, the Company’s largest market, were positively impacted by approximately $6.87 million related to a rate increase filed on October 1, 2003 for insured closing services. The increase in Florida is due primarily to the increase in agent business.

Branch Office Net Premiums:  Branch office net premiums written as a percentage of total net premiums written were 44%, 37% and 36% in 2004, 2003 and 2002, respectively. Net premiums written from branch operations increased 1.5% in 2004 compared with 2003 and increased 28.2% in 2003 compared with 2002. Of the Company’s 29 branch locations that underwrite title insurance policies, 27 are located in North Carolina and, as a result, branch net premiums written primarily represent North Carolina business. The increase in branch premiums relative to total premiums has increased primarily due to the rate increase filed in North Carolina, as noted above.

Agency Net Premiums:  Agency net premiums written as a percentage of total net premiums written were 56%, 63% and 64% in 2004, 2003 and 2002, respectively. Net premiums written from agency operations decreased 23.9% in 2004 compared with 2003 and increased 22.7% in 2003 compared with 2002. The majority of the decrease in agency net premiums written in 2004 can be attributed to the general decline in business due to the slowdown in refinancing activity as a result of increased interest rates in 2004. For the year ended December 31, 2003, premiums written in Michigan declined due to a decrease in the number of Michigan issuing agents.

Exchange Services

Operating revenues from the Company’s two subsidiaries that provide tax-deferred exchange services (ITEC and ITAC) increased 125% from 2003 to 2004 and increased 31.4% from 2002 to 2003. The increase in 2004 and 2003 compared with prior year periods was primarily due to increased interest income earned on deposits held by the Company, an increased demand for qualified intermediary services, as well as an increase in the average fee per transaction, and can also be attributed to more favorable economic conditions.

Seasonality

Title Insurance

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. Historically, the first quarter has the least real estate activity because fewer real estate transactions occur, while the remaining quarters are more active. Refinance activity is generally less seasonal, but it is subject to interest rate volatility. Fluctuations in mortgage interest rates, as well as other economic factors, can cause shifts in real estate activity outside of the normal seasonal pattern.

Exchange Services

Seasonal factors affecting the level of real estate activity and the volume of title premiums written will also affect the demand for exchange services.

Investment Income

The Company’s title insurance subsidiaries are required by statute to maintain minimum levels of investments in order to protect the interests of policyholders. In formulating its investment strategy, the Company has emphasized after-tax income. Investments in marketable securities have increased from funds retained in the Company. The investments are primarily in fixed maturity securities and, to a lesser extent, equity securities. The effective maturity of the majority of the fixed income investments is within 15 years.

As new funds become available, they are invested in accordance with the Company’s investment policy and corporate goals. Securities purchased may include a combination of taxable fixed-income securities, tax exempt securities and equities. The Company strives to maintain a high quality investment portfolio.

Investment income increased 2.3% from 2003 to 2004 and decreased 4.1% from 2002 to 2003. The increase in 2004 was primarily attributable to an increase in the average investment portfolio balance. The decrease in 2003 was primarily due to the decline in interest rates.

Expenses

Following is a  summary by segment of the Company’s operating expenses. Intersegment eliminations have been netted with each segment therefore the individual segment amounts will not agree to Note 13 in the accompanying Consolidated Financial Statements.

	2004				2003				2002
Title insurance	$	61,440,491	95.5	%	$	72,787,789	97.5	%	$	59,644,502	97.5	%
Exchange services		640,183	1.0	%		495,119	.7	%		441,386	.7	%
All other		2,258,336	3.5	%		1,375,949	1.8	%		1,097,610	1.8	%
	$	64,339,010	100	%	$	74,658,857	100	%	$	61,183,498	100	%

On a combined basis, profit margins were 13.4%, 12.1% and 11.1% in 2004, 2003 and 2002, respectively. Although total revenues decreased 12.1% in 2004, operating expenses decreased 13.8%, contributing to more favorable combined profit margins for 2004. The increase of 24.7% in net premiums written coupled with a smaller increase of only 22% in operating expenses contributed to the increase in profit margins for 2003. Due to the fixed nature of certain operating expenses and the increase in premium volume, profit margins improved in 2003.

Title Insurance

Profit Margins:  The Company’s title insurance profit margins vary according to a number of factors, including the volume and type of real estate activity. Profit margins for the title insurance segment were 12.4%, 11.7% and 10.8% in 2004, 2003 and 2002, respectively. In 2004, the percentage decrease in operating expenses, particularly the decrease in commissions paid to agents, offset the percentage decrease in premiums written. In order to maintain and improve margins, the Company strives to identify opportunities to refine operating procedures and to implement processes designed to reduce expenses. The increase in premiums written contributed to the improvement in the profit margin for 2003.

Commissions:  Commissions to agents decreased 25.5% from 2003 to 2004 primarily due to decreased premiums from agency operations in 2004 and increased 22.2% from 2002 to 2003 primarily due to increased premiums from agent sources. Commission expense as a percentage of net premiums written by agents was 72.5%, 74% and 74.3% for 2004, 2003 and 2002, respectively. Commission rates vary geographically and may be influenced by state regulations.

Provisions for Claims:  The provision for claims as a percentage of net premiums written was 11.1% in 2004 and 2003 and 10.2% in 2002. Loss provision rates are subject to variability and are reviewed and adjusted as experience develops. Declining economic conditions and/or declines in transaction volumes have historically been factors in increased claim expenses due to increased mechanics liens, defalcations and other matters which may be discovered during property foreclosures. Title claims are typically reported within the first several years of policy

issuance.  The provision 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. Payments of claims, net of recoveries, were $6,173,339, $4,891,739 and $2,701,822 in 2004, 2003 and 2002, respectively. The increase in 2004 was primarily attributable to the increase in premiums written in recent years. Claims payments increased in 2003 generally due to the increase in policies written. The lower amount of claims payments in 2002, when compared with 2004 and 2003, can be attributed to timing issues. Claim payments may trend higher in 2005 and beyond, given the high levels of premiums written in recent years.

Reserves for Claims:  The Company has continued to strengthen its reserves for claims. At December 31, 2004, the total reserves for claims were $31,842,000. Of that total, $4,262,291 was reserved for specific claims, and $27,579,709 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. Management analyzes historical claims experience, mix of business, geographic considerations, industry averages, and current economic conditions in establishing loss provision rates. Claims reserves are reviewed as to their reasonableness by independent actuaries annually. The Company’s claims reserves are consistent with the independent actuary’s claims reserves. Actuarial projections are compared with recorded reserves and any necessary adjustments are included in current operations. There are no known claims that are expected to have a materially adverse effect on the Company’s financial position or operating results.

Salaries and Employee Benefits:  On a consolidated basis, salaries and employee benefits as a percentage of net premiums written were 22.7%, 18.6% and 18.7 % in 2004, 2003 and 2002, respectively. The increase in these costs in 2004 was attributable to several factors, including certain employee benefits associated with key executive employment agreements entered into in late 2003, additional personnel costs related to staff hired by the newly formed Investors Trust Company and the regulated investment advisory and various staff additions. The title insurance segment’s total salaries and employee benefits accounted for 89%, 93% and 93.5% of total salaries for 2004, 2003 and 2002, 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 the Chief Operating Officer of ITIC. These individuals also serve as the Chief Executive Officer, 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 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 these plans at December 31, 2004 and 2003 was $1,185,000 and $452,000, respectively, and was calculated based on the terms of the contract.

Office Occupancy and Operations:  Overall office occupancy and operations as a percentage of net premiums was 7.5%, 6.1% and 7.1% in 2004, 2003 and 2002, respectively. The increase in office occupancy and operations expense was primarily due to an increase in depreciation expense, contract labor and office supplies. In addition, in September 2004, additional office space was leased. The decline in office occupancy and operations as a percentage of net premiums written during 2003 and 2002 was partially due to a decrease in depreciation expense of approximately $555,000 and $450,000, respectively, compared with 2001 due to utilizing certain EDP equipment beyond their depreciable lives. The title insurance segment’s total office occupancy and operations accounted for 91%, 93.7% and 92.9% in 2004, 2003 and 2002, respectively.

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. Premium and retaliatory taxes as a percentage of premiums written were 1.95%, 1.99% and 2.04% for the years ended December 31, 2004, 2003 and 2002, respectively.

Professional fees: Professional fees for 2004 and 2003 increased primarily due to the costs associated with compliance with Section 404 of the Sarbanes-Oxley Act of 2002, along with an increase in various other professional and legal fees.

Exchange Services

The exchange services segment’s total operating expenses as a percentage of the Company’s total expenses were 1.0%, .7%, and .7% for 2004, 2003 and 2002, respectively. The principal operating expenses of this segment are salaries, employee benefits and payroll taxes.

Income Taxes

The provision for income taxes was 30.9%, 32.2% and 30.5% of income before income taxes for the years ended December 31, 2004, 2003 and 2002, respectively. The decrease in the effective rate for the year ended December 31, 2004 was primarily due to an increase in tax-exempt investment income and a reduction in the overall effective tax rate, due to a decrease in taxable income taxed at the highest marginal rate. The increase in the effective rate for the year ended December 31, 2003 was primarily due to an increase in taxable income, which placed the Company in a higher tax bracket, and a change in the ratio of tax-exempt investment income to taxable income. Information regarding the components of the income tax expense can be found in Note 8 to the accompanying Consolidated Financial Statements.

Net Income

A summary by segment of the Company’s net income is as follows:

	2004					2003				2002
Title insurance	$	9,332,205		87.1	%	$	10,320,860	94.1	%	$	7,706,961	95.0	%
Exchange services		1,464,952		13.6	%		462,933	4.2	%		317,154	3.9	%
All other		(77,991	)	(0.7	%)		181,221	1.7	%		84,727	1.1	%
	$	10,719,166		100	%	$	10,965,014	100	%	$	8,108,842	100	%

On a consolidated basis, the Company reported a decrease in net income of 2.2% in 2004 and an increase in net income of 35.2% and 34.9% in 2003 and 2002, respectively. The decrease in 2004 was due to lower premiums written. The increase in 2003 was primarily attributable to increased premium volume and improved operating efficiencies associated with technology enhancements and expense control procedures.

Title Insurance

Net income for the title insurance segment decreased 9.6% from 2003 to 2004, primarily due to the decline in premiums written. Net income for the title insurance segment increased 33.9% from 2002 to 2003. The increase in 2003 was primarily attributable to increased premium volume that resulted from expanding markets through agents and greater penetration of existing agents, as well as another year of reduced mortgage interest rates.

Exchange Services

Net income of the exchange services segment increased 216% from 2003 to 2004 and 46% from 2002 to 2003. Net income increased in 2004 and 2003 primarily due to an increase in the volume of exchange transactions and an increase in the average fee per exchange.

Liquidity and Capital Resources

Liquidity:   Due to the Company’s consistent ability to generate positive cash flows from its operations (primarily underwriting and investment income), management believes that funds generated from operations will enable the Company to adequately meet its operating needs and is unaware of any trend or occurrence that is likely to result in material adverse liquidity changes. The Company’s cash requirements include general operating expenses, taxes, capital expenditures and dividends on 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.

Cash Flows:   Net cash flows provided by operating activities were $15,685,967, $17,138,683 and $12,843,431 in 2004, 2003 and 2002, respectively. The net decrease in 2004 is primarily the result of the decrease in the provision for claims and an increase in claims payments. The net increase in 2003 is primarily the result of the increase in net income and the accelerated collection of accounts receivable compared with 2002. The principal nonoperating uses of cash and cash equivalents for the three year period ended December 31, 2004, were for additions to the investment portfolio, capital expenditures and repurchases of common stock. The most significant nonoperating sources of cash and cash equivalents were proceeds from the sales and maturities of certain investments. The net effect of all activities on to tal cash and cash equivalents was a decrease of $398,913 for 2004 and an increase of $1,343,395 for 2003 and $712,032 for 2002. As of December 31, 2004, the Company held cash and cash equivalents of $4,726,443.

Payment of Dividends:  As of December 31, 2004 and 2003, approximately $58,014,000 and $53,477,000, respectively, 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 insurance department approval. 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. These regulations, among other things, 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 subsidiaries are adequate to meet t he Company’s operating needs.

Purchase of Company Stock:  On June 5, 2000, the Board of Directors of ITIC approved ITIC’s purchase of 500,000 shares of the Company’s common stock. Pursuant to this approval, ITIC purchased 37,635 shares in the twelve months ended December 31, 2004, 41,175 shares in the twelve months ended December 31, 2003 and 19,134 shares in the twelve months ended December 31, 2002 at an average per share price of $31.42, $23.96 and $18.81, respectively.

During the twelve months ended December 31, 2004, ITIC purchased common stock for $1,182,654 and transferred common stock totaling $353,078 in satisfaction of stock option exercises, stock bonuses and other stock transfers. In 2004, retained earnings had a net increase of $9,515,165, after purchases and issuances of common stock for compensation and options exercised reduced retained earnings by $829,576.

Capital Expenditures: During 2005, the Company has plans for various capital improvement projects, including several software development projects. The Company anticipates capital expenditures of approximately $900,000 in connection with these projects and additional purchases of electronic data processing equipment.

Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary exposure to market risk relates to the impact of adverse changes in interest rates and market prices of its investment portfolio. Increases in interest rates diminish the value of fixed income securities and preferred stock and decreases in stock market values diminish the value of common stocks held.

Corporate Oversight

The Company generates substantial investable funds from its two insurance subsidiaries. In formulating and implementing policies for investing new and existing funds, the Company has emphasized maximizing total after-tax return on capital and earnings while ensuring the safety of funds under management and adequate liquidity. The Company’s Board of Directors oversees investment risk management processes. The Company seeks to invest premiums and other income to create future cash flows that will fund future claims, employee benefits and expenses, and earn stable margins across a wide variety of interest rate and economic scenarios. The Board has established specific investment policies that define the overall framework for managing market and other investment risks, including the accountabilities and controls over these activities. The Company may rebalance its existing asset portfolios or change the character of future investments from time to time to manage its exposure to market risk within defined tolerance ranges.

Interest Rate Risk

Interest rate risk is the risk that the Company will incur economic losses due to adverse changes in interest rates. This risk arises from the Company’s investments in interest-sensitive debt securities. These securities are primarily fixed rate municipal bonds and corporate bonds. The Company does not purchase such securities for trading purposes. At December 31, 2004, the Company had approximately $45 million in fixed rate bonds. The Company manages the interest rate risk inherent in its assets by monitoring its liquidity needs and by targeting a specific range for the portfolio’s duration or weighted average maturity.

To determine the potential effect of interest rate risk on interest-sensitive assets, the Company calculates the effect of a 10% change in prevailing interest rates (“rate shock”) on the fair market value of these securities considering stated interest rates and time to maturity. Based upon the information and assumptions the Company uses in its calculation, management estimates that a 10% immediate, parallel increase in prevailing interest rates would decrease the net fair market value of its fixed rate debt securities by approximately $1.9 million.The selection of a 10% immediate parallel increase in prevailing interest rates should not be construed as a prediction by the Company’s management of future market events, but rather, to illustrate the potential impact of such an event. To the extent that actual results differ from the assumptions utilized, the Company’s rate shock measures could be significantly impacted. Additionally, the Company’s calculation assumes that the current relationship between short-term and long-term interest rates (the term structure of interest rates) will remain constant over time. As a result, these calculations may not fully capture the impact of nonparallel changes in the term structure of interest rates and/or large changes in interest rates.

Equity Price Risk

Equity price risk is the risk that the Company will incur economic losses due to adverse changes in a particular stock or stock index. At December 31, 2004, the Company had approximately $7.2 million in nonredeemable preferred and common stocks. Equity price risk is addressed in part by varying the specific allocation of equity investments over time pursuant to management’s assessment of market and business conditions and ongoing liquidity needs analysis. The Company’s largest equity exposure is declines in the S&P 500; its portfolio of equity instruments is similar to those that comprise this index. Based upon the information and assumptions the Company used in its calculation, management estimates that an immediate decrease in the S&P 500 of 10% would decrease the net fair value of the Company’s assets identified above by approximately $724,000. The selection of a 10% immediate decrease in the S&P 500 should not be construed as a prediction by the Company’s management of future market events, but rather, to illustrate the potential impact of such an event. Since this calculation is based on historical performance, projecting future price volatility using this method involves an inherent assumption that historical volatility and correlation relationships will remain stable. Therefore, the results noted above may not reflect the Company’s actual experience if future volatility and correlation relationships differ from such historical relationships.

Critical Accounting Policies

The Company’s management makes various estimates 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 policies considered critical to the Company:

Premiums Written and Commissions to Agents

Title insurance premiums are recorded and recognized as revenue at the time of closing of the related transaction as the earnings process is 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 expense concurrently with premium recognition.

Reserves for Claims

The total reserve for all reported and unreported losses the Company incurred on its income statement through December 31, 2004 is represented by the reserve for claims on the consolidated balance sheet. 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 (incurred but not reported claims).

Because of the uncertainty of future claims, the effect of changes in economic conditions, and the fact that many claims do not materialize for several years, reserve estimates are subject to variability. Declining economic conditions may result in an increase in mechanics liens and defalcations, thus increasing the Company’s claims expenses. Management analyzes historical claims experience, mix of business, geographic considerations, industry averages and current economic conditions in establishing loss provision rates. Claims reserves are reviewed as to their reasonableness by an independent actuarial firm annually. The Company’s claims reserves are consistent with the independent actuary’s claims reserves. Actuarial projections are compared with recorded reserves and any necessary adjustments are included in current operations.

Despite the variability of such estimates, management believes based on historical claims experience and independent actuarial analysis that the reserves are adequate to cover claim losses resulting from pending and future claims for policies issued through December 31, 2004. The Company continually reviews and adjusts its reserve estimates to reflect its loss experience and any new information that becomes available. Currently, there are no known claims that are expected to have a materially adverse effect on the Company’s financial position or operating results.

Investments in Securities

Securities for which the Company has the intent and ability to hold to maturity are classified as held-to-maturity and are 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, adjusted for other-than-temporary declines in fair value, with unrealized gains and losses reported as accumulated other comprehensive income. Securities are continually monitored for differences between the cost and estimated fair value of each security. Fair values of all investments are based on quoted market prices. Realized gains and losses are determined on the specific identification method.

Deferred Tax Asset

The Company recorded net deferred tax assets at December 31, 2004 and 2003 related primarily to reserves for claims, allowance for doubtful accounts and employee benefits. 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.

Off-Balance Sheet Arrangements and Contractual Obligations

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 and other assets held by the Company for these purposes were approximately $16,621,000 and $6,676,000 as of December 31, 2004 and 2003, respectively. These amounts are not considered assets of the Company, and therefore, are excluded from the accompanying consolidated balance sheets. The Company remains contingently liable for the disposition of these deposits.

        In addition, in administering tax-deferred 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 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 $165,594,000 and $99,186,000 as of December 31, 2004 and 2003, respectively.  These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying consolidated balance sheets. The Company remains contingently liable for the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate.

        It is not the general practice of the Company to enter into off-balance sheet arrangements nor is it the policy of the Company to issue guarantees to third parties. Off-balance sheet arrangements are generally limited to the future payments under noncancelable operating leases, payments due under various agreements with third party service providers, and obligations pursuant to certain executive employment agreements.

The following table summarizes the Company’s future estimated cash payments under existing contractual obligations at December 31, 2004 including payments due by period:

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Operating lease obligations	$	1,082,684	$	627,763	$	440,121	$	14,800	$	—
Reserves for claims		31,842,000		3,695,299		8,489,115		5,590,569		14,067,017
Other obligations		764,771		578,450		141,321		45,000		—
Executive employment agreements     obligations		1,185,000		—		—		—		1,185,000
Total	$	34,874,455	$	4,901,512	$	9,070,557	$	5,650,369	$	15,252,017

Recent Accounting Standards

      In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 amended Accounting Research Bulletin 51, Consolidated Financial Statements, and established standards for determining circumstances under which a variable interest entity (“VIE”) should be consolidated by its primary beneficiary. FIN 46 also requires disclosures about VIEs that the Company is not required to consolidate but in which it has a significant variable interest. In December 2003, the FASB issued FIN 46-R, which not only included amendments to FIN 46, but also required application of the interpretation to all affected entities no later than March 31, 2004 for calendar-year reporting companies. Prior to FIN 46-R, however, companies were required to apply the interpretation to special-purpose entities by December 31, 2003. The adoption of FIN 46-R as it relates to special-purpose entities did not have any effect on the Company’s results of operations, financial position or liquidity. The Company did not have a material impact upon its full adoption of the interpretation as of March 31, 2004.

In March 2004, the Emerging Issues Task Force (“EITF”) released EITF Issue 03-01, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. The Issue provides guidance for determining whether an investment is other-than-temporarily impaired and requires certain disclosures with respect to these investments. The recognition and measurement guidance for other-than-temporary impairment has been delayed by the issuance of FASB Staff Position EITF 03-1-1 on September 30, 2004. The adoption of Issue 03-1 did not result in any other-than-temporary impairment.

In December 2004, the FASB issued SFAS No. 123(R), Accounting for Stock-Based Compensation. SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. Prior to SFAS No. 123(R), only certain pro forma disclosures of fair value were required. The provisions of this Statement are effective for the first interim reporting period that begins after June 15, 2005. Accordingly, we will adopt SFAS No. 123(R) commencing with the quarter ending September 30, 2005. If we had included the cost of employee stock option compensation in our consolidated financial statements, our net income for the fiscal years ended December 31, 2004, 2003 and 2002 would have decreased by $153,228, $145,367 and $125,541, respectively. Accordingly, the adoption of SFAS No. 123(R) is not expected to have a material effect on the Company’s consolidated financial statements.

Selected Quarterly Financial Data

2004	March 31		June 30		September 30		December 31
Net premiums written	$	16,981,756	$	19,649,652	$	18,334,559	$	16,809,190
Net income		2,221,604		2,880,395		2,927,864		2,689,303
Basic earnings per common share		.89		1.15		1.17		1.08
Diluted earnings per common share		.84		1.10		1.12		1.03

2003	March 31		June 30		September 30		December 31
Net premiums written	$	19,667,985	$	23,322,629	$	23,469,590	$	17,467,108
Net income		2,608,561		3,087,452		2,963,799		2,305,202
Basic earnings per common share		1.04		1.24		1.18		.92
Diluted earnings per common share		1.00		1.18		1.13		.88

Investors Title Company and Subsidiaries
Consolidated Balance Sheets

as of December31,	2004		2003
Assets
Cash and cash equivalents	$	4,726,443	$	5,125,356
Investments in securities (Notes 2 and 3):
Fixed maturities:
Held-to-maturity, at amortized cost (fair value: 2004: $2,330,129; 2003: $2,646,869)		2,202,635		2,481,353
Available-for-sale, at fair value (amortized cost: 2004: $70,371,143; 2003: $42,172,395)		72,471,766		45,100,520
Equity securities, available-for-sale at fair value (cost: 2004: $4,442,304; 2003: $12,289,005)		7,240,306		14,556,785
Short term investments		10,134,321		16,747,964
Other investments		1,211,517		955,561
Total investments		93,260,545		79,842,183
Premiums receivable (less allowance for doubtful accounts: 2004: $2,240,000; 2003: $2,474,000)		6,679,994		8,031,803
Accrued interest and dividends		753,638		667,147
Prepaid expenses and other assets		1,410,584		934,345
Property acquired in settlement of claims		322,517		286,517
Property, net (Note 4)		4,592,784		4,099,243
Deferred income taxes, net (Note 8)		1,440,247		1,485,217
Total Assets	$	113,186,752	$	100,471,811
Liabilities and Stockholders’ Equity
Liabilities
Reserves for claims (Note 6)	$	31,842,000	$	30,031,000
Accounts payable and accrued liabilities (Note 10)		7,919,651		6,243,906
Commissions and reinsurance payables (Note 5)		551,662		726,191
Current income taxes payable		366,168		281,968
Total liabilities		40,679,481		37,283,065
Commitments and Contingencies (Notes 5, 9, 10 and 11)
Stockholders’ Equity (Notes 2, 3, 7, 12 and 14)
Class A Junior Participating preferred stock (shares authorized 100,000; no shares issued)		—		—
Common stock-no par value (shares authorized 10,000,000; 2,481,024 and     2,503,923 shares issued and outstanding 2004 and 2003, respectively, excluding     374,720 and 351,821 shares 2004 and 2003, respectively, of common stock     held by the Company’s subsidiary)		1		1
Retained earnings		69,272,092		59,756,927
Accumulated other comprehensive income (net unrealized gain on investments)    (net of deferred taxes: 2004: $1,663,447; 2003: $1,768,477) (Note 8)		3,235,178		3,431,818
Total stockholders’ equity		72,507,271		63,188,746
Total Liabilities and Stockholders’ Equity	$	113,186,752	$	100,471,811

See notes to consolidated financial statements.

Investors Title Company and Subsidiaries
Consolidated Statements of Income

for the Years Ended December 31,	2004		2003		2002
Revenues
Underwriting income:
Premiums written (Note 5)	$	72,069,796	$	84,365,541	$	67,647,012
Less—premiums for reinsurance ceded (Note 5)		294,639		438,229		348,395
Net premiums written		71,775,157		83,927,312		67,298,617
Investment income-interest and dividends (Note 3)		2,752,838		2,691,687		2,806,808
Net realized gain on sales of investments (Note 3)		93,656		258,718		279,301
Exchange services revenue		2,801,888		1,245,234		947,426
Other		2,417,637		2,706,920		1,520,188
Total		79,841,176		90,829,871		72,852,340
Operating Expenses
Commissions to agents		29,152,645		39,113,544		32,006,188
Provision for claims (Note 6)		7,984,339		9,292,739		6,871,822
Salaries, employee benefits and payroll taxes (Notes 7 and 10)		16,303,351		15,644,097		12,591,736
Office occupancy and operations (Note 9)		5,384,398		5,149,386		4,810,283
Business development		1,899,315		1,905,609		2,161,928
Taxes, other than payroll and income		453,354		347,186		387,594
Premium and retaliatory taxes		1,406,083		1,680,952		1,378,880
Professional fees		1,540,066		1,137,648		772,096
Other		215,459		387,696		202,971
Total		64,339,010		74,658,857		61,183,498
Income Before Income Taxes		15,502,166		16,171,014		11,668,842
Provision for Income Taxes (Note 8)		4,783,000		5,206,000		3,560,000
Net Income	$	10,719,166	$	10,965,014	$	8,108,842
Basic Earnings per Common Share (Note 7)	$	4.29	$	4.38	$	3.22
Weighted Average Shares Outstanding—Basic		2,496,711		2,503,659		2,517,328
Diluted Earnings per Common Share (Note 7)	$	4.09	$	4.18	$	3.12
Weighted Average Shares Outstanding—Diluted		2,620,916		2,624,473		2,597,979

See notes to consolidated financial statements.

Investors Title Company and Subsidiaries
Consolidated Statements of Stockholders’ Equity

for the Years Ended December 31, 2004, 2003 and 2002						Retained Earnings			Accumulated Other Comprehensive Income (Net Unrealized Gain (loss) on Investments)			Total Stockholders’ Equity
	Common Stock
	Shares			Amount
Balance,   January 1, 2002	2,516,298		$	1	$	41,928,575		$	2,343,192		$	44,271,768
Net income						8,108,842						8,108,842
Dividends ($.12 per share)						(300,557	)					(300,557	)
Shares of common stock repurchased	(19,134	)				(359,903	)					(359,903	)
Issuance of common stock in payment of       bonuses and fees	3,036					56,757						56,757
Stock options exercised	15,604					179,330						179,330
Net unrealized gain on investments									711,947			711,947
Balance,   December 31, 2002	2,515,804			1		49,613,044			3,055,139			52,668,184
Net income						10,965,014						10,965,014
Dividends ($.12 per share)						(300,411	)					(300,411	)
Shares of common stock repurchased	(41,175	)				(986,479	)					(986,479	)
Issuance of common stock in payment of      bonuses and fees	2,144					51,224						51,224
Stock options exercised	27,150					414,535						414,535
Net unrealized gain on investments									376,679			376,679
Balance,   December 31, 2003	2,503,923			1		59,756,927			3,431,818			63,188,746
Net income						10,719,166						10,719,166
Dividends ($.15 per share)						(374,425	)					(374,425	)
Shares of common stock repurchased	(37,635	)				(1,182,654	)					(1,182,654	)
Issuance of common stock in payment of      bonuses and fees	876					28,217						28,217
Stock options exercised	13,860					324,861						324,861
Net unrealized loss on investments									(196,640	)		(196,640	)
Balance,    December 31, 2004	2,481,024		$	1	$	69,272,092		$	3,235,178		$	72,507,271

See notes to consolidated financial statements.

Investors Title Company and Subsidiaries
Consolidated Statements of Comprehensive Income

for the Years Ended December 31,	2004			2003			2002
Net income	$	10,719,166		$	10,965,014		$	8,108,842
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on investments arising during the year		(204,283	)		829,443			1,358,009
Less: reclassification adjustment for gains realized in net income		(93,656	)		(258,718	)		(279,301	)
Other comprehensive income (loss), before tax		(297,939	)		570,725			1,078,708
Income tax expense (benefit) related to unrealized gains (losses)    on investments arising during the year		(69,456	)		282,010			461,723
Income tax expense related to reclassification adjustment for     gains realized in net income		(31,843	)		(87,964	)		(94,962	)
Net income tax expense (benefit) on other comprehensive income		(101,299	)		194,046			366,761
Other comprehensive income (loss)		(196,640	)		376,679			711,947
Comprehensive income	$	10,522,526		$	11,341,693		$	8,820,789

See notes to consolidated financial statements.

Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows

for the Years Ended December 31,	2004			2003			2002
Operating Activities
Net income	$	10,719,166		$	10,965,014		$	8,108,842
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		968,914			848,552			961,872
Amortization, net		44,303			26,409			25,022
Issuance of common stock in payment of bonuses and fees		28,217			51,224			56,757
Provision (benefit) for losses on premiums receivable		(234,000	)		674,000			395,000
Net gain on disposals of property		(4,395	)		(4,791	)		(15,485	)
Net realized gain on sales of investments		(93,656	)		(258,718	)		(279,301	)
Provision for claims		7,984,339			9,292,739			6,871,822
Provision (benefit) for deferred income taxes		150,000			(786,000	)		(906,000	)
Changes in assets and liabilities:
(Increase) decrease in receivables and other assets		987,079			270,698			(1,806,897	)
Increase in accounts payable and accrued liabilities		1,399,668			1,232,261			1,265,278
Increase (decrease) in commissions and reinsurance payables		(174,529	)		325,151			119,079
Increase (decrease) in current income taxes payable		84,200			(606,117	)		749,264
Payments of claims, net of recoveries		(6,173,339	)		(4,891,739	)		(2,701,822	)
Net cash provided by operating activities		15,685,967			17,138,683			12,843,431
Investing Activities
Purchases of available-for-sale securities		(61,955,609	)		(15,748,801	)		(8,490,059	)
Purchases of short term securities		(9,537,040	)		(7,712,288	)		(10,410,064	)
Purchases of and net earnings from other investments		(265,143	)		(486,000	)		(499,894	)
Proceeds from sales and maturities of available-for-sale securities		41,648,634			7,754,400			4,574,556
Proceeds from maturities of held-to-maturity securities		283,000			897,000			880,751
Proceeds from sales of short term securities		16,146,292			1,486,879			3,412,955
Proceeds from sales and distributions from other investments		9,187			106,100			—
Purchases of property		(1,504,787	)		(894,238	)		(691,968	)
Proceeds from disposals of property		46,727			61,119			69,551
Net change in pending trades		276,077			(387,104	)		(496,097	)
Net cash used in investing activities		(14,852,662	)		(14,922,933	)		(11,650,269	)
Financing Activities
Repurchases of common stock		(1,182,654	)		(986,479	)		(359,903	)
Exercise of options		324,861			414,535			179,330
Dividends paid		(374,425	)		(300,411	)		(300,557	)
Net cash used in financing activities		(1,232,218	)		(872,355	)		(481,130	)
Net Increase (Decrease) in Cash and Cash Equivalents		(398,913	)		1,343,395			712,032
Cash and Cash Equivalents, Beginning of Year		5,125,356			3,781,961			3,069,929
Cash and Cash Equivalents, End of Year	$	4,726,443		$	5,125,356		$	3,781,961
Supplemental Disclosures Cash Paid During the Year for
Income Taxes (net of refunds)	$	4,553,000		$	6,612,000		$	3,718,000

See notes to consolidated financial statements.

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”) two primary business segments are title insurance and exchange services. The Company’s title insurance segment, through its two subsidiaries, Investors Title Insurance Company (“ITIC”) and Northeast Investors Title Insurance Company (“NE-ITIC”), 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 in North Carolina and South Carolina, and primarily through independent issuing agents in the District of Columbia, Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia and Wisconsin. The majority of the Company’s business is concentrated in Michigan, New York, North Carolina, Pennsylvania, South Carolina, Tennessee and Virginia. Investors Title Exchange Corporation (“ITEC”) acts as an intermediary in tax-deferred exchanges of property held for productive use in a trade or business or for investments, while Investors Title Accommodation Corporation (“ITAC”) serves as an exchange accommodation titleholder, offering a vehicle for accomplishing a reverse exchange when a taxpayer must acquire replacement property before selling the relinquished property. Both ITEC and ITAC derive their income from fees for handling exchange transactions.

Principles of Consolidation and Basis of Presentation—The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Reclassification

Certain 2003 and 2002 amounts in the consolidated financial statements have been reclassified to conform to the 2004 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 statements of cash flows, cash equivalents are highly liquid investments with 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 of these investments.

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, adjusted for other-than-temporary declines in fair value, with unrealized gains and losses, net of tax, reported as accumulated other comprehensive income. Securities are continually monitored for differences between the cost and estimated fair value of each security. Fair values of all investments are based on quoted market prices. Realized gains and losses are determined on the specific identification method.

Short term investments

        Short term investments comprise money market accounts, 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 did not identify any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments.

Other investments

         Other investments consist primarily of investments in affiliates, which are accounted for under the equity or cost method of accounting. The Company did not identify any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments.

Property Acquired in Settlement of Claims

Property acquired in settlement of claims are 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 (3 to 25 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, 2004, is represented by the reserve 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, 2004. 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.

Deferred Income Taxes

The Company provides for deferred income taxes (benefits) for the tax consequences on future years on temporary differences between the financial statements’ carrying values and the tax bases of assets and liabilities using currently enacted tax rates.

Premiums Written and Commissions to Agents

Premiums are recorded and recognized as revenue at the time of closing of the related transaction as the earnings process is considered complete. Title insurance commissions earned by the Company’s agents are recognized as expense concurrently with premium recognition.

Fair Values of Financial Instruments

         Fair values for investment securities are based on quoted market prices. The carrying amounts reported in the balance sheet for short term investments, premiums receivable, accrued interest and dividends, accounts payable, commissions and reinsurance payables and current income taxes payable approximates cost, which is what is reflected on the balance sheet, due to the short term nature of these assets and liabilities.

Comprehensive Income

The Company’s other comprehensive income is solely comprised of unrealized holding gains on available-for-sale securities, net of tax.

Stock-Based Compensation Disclosure

The Company has adopted Employee Stock Option Purchase Plans (the “Plans”) under which options to purchase shares (not to exceed 650,000 shares) of the Company’s stock may be granted to key employees of the Company at a price not less than the market value on the date of grant. All options are exercisable at 10% to 20% per year beginning on the date of grant or one year from the date of grant and generally expire in five to ten years. The Company applies the intrinsic value method of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations in accounting for its employee stock option plans and, accordingly, no compensation cost has been recognized.

Had compensation cost for the Plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of Financial Accounting Standards Board Statement No. 123, Accounting for Stock-Based Compensation, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

	2004		2003		2002
Net income:
As reported	$	10,719,166	$	10,965,014	$	8,108,842
Add back issuance of common stock in payment of bonuses and fees, net of tax		18,623		33,808		37,460
Deduct – Total stock-based compensation expense                       under fair value method for all awards, net of tax		171,851		179,175		163,001
Pro forma	$	10,565,938	$	10,819,647	$	7,983,301
Basic earnings per common share:
As reported	$	4.29	$	4.38	$	3.22
Pro forma		4.23		4.32		3.17
Diluted earnings per common share:
As reported	$	4.09	$	4.18	$	3.12
Pro forma		4.03		4.12		3.07

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

	2004		2003		2002
Exercise price equal to market price on date of grant:
Weighted average exercise price	$	28.92	$	23.39	$	19.40
Weighted average grant-date fair value		13.47		10.78		8.83

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

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2004, 2003 and 2002, respectively: dividend yield of .5%, .4% and .6%; expected volatility of 31%, 31% and 32%; risk-free interest rates of approximately 4.2%, 4.3% and 3.9%; and expected lives of 10 years.

Escrows and Like-Kind Exchanges

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 were approximately $16,621,000 and $6,676,000 as of December 31, 2004 and 2003, respectively. In addition, in administering tax-deferred 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 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 $165,594,000 and $99,186,000 as of December 31, 2004 and 2003 respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying consolidated balance sheets. The Company remains contingently liable for the disposition of these deposits and for the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate.

Recent Accounting Standards

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 amended Accounting Research Bulletin 51, Consolidated Financial Statements, and established standards for determining circumstances under which a variable interest entity (“VIE”) should be consolidated by its primary beneficiary. FIN 46 also requires disclosures about VIEs that the Company is not required to consolidate but in which it has a significant variable interest. In December 2003, the FASB issued FIN 46-R, which not only included amendments to FIN 46, but also required application of the interpretation to all affected entities no later than March 31, 2004 for calendar-year reporting companies. Prior to FIN 46-R, however, companies were required to apply the interpretation to special-purpose entities by December 31, 2003. The adoption of FIN 46-R as it relates to special-purpose entities did not have any effect on the Company’s results of operations, financial position or liquidity. The Company did not have a material impact upon its full adoption of the interpretation as of March 31, 2004.

In March 2004, the Emerging Issues Task Force (“EITF”) released EITF Issue 03-01, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. The Issue provides guidance for determining whether an investment is other-than-temporarily impaired and requires certain disclosures with respect to these investments. The recognition and measurement guidance for other-than-temporary impairment has been delayed by the issuance of FASB Staff Position EITF 03-1-1 on September 30, 2004. The adoption of Issue 03-1 did not result in any other-than-temporary impairment.

In December 2004, the FASB issued SFAS No. 123(R), Accounting for Stock-Based Compensation. SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. Prior to SFAS No. 123(R), only certain pro forma disclosures of fair value were required. The provisions of this Statement are effective for the first interim reporting period that begins after June 15, 2005. Accordingly, we will adopt SFAS No. 123(R) commencing with the quarter ending September 30, 2005. If we had included the cost of employee stock option compensation in our consolidated financial statements, our net income for the fiscal years ended December 31, 2004, 2003 and 2002 would have decreased by  $153,228, $145,367 and $125,541, respectively. Accordingly, the adoption of SFAS No. 123(R) is not expected to have a material effect on the Company’s consolidated financial statements.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 from those estimates and assumptions used.

2. Statutory Restrictions on Consolidated Stockholders’ Equity and Investments

The Company has designated approximately $33,066,000 and $30,223,000 of retained earnings as of December 31, 2004 and 2003, respectively, as appropriated to reflect the required statutory premium reserve. See Note 8 for the tax treatment of the statutory premium reserve.

As of December 31, 2004 and 2003, approximately $58,014,000 and $53,477,000, 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 $3,639,000 and $3,235,000 at December 31, 2004 and 2003, respectively, are deposited with the insurance departments of the states in which business is conducted. These investments are restricted as to withdrawal as required by law.

3. Investments in Securities

The aggregate fair value, gross unrealized holding gains, gross unrealized holding losses, and amortized cost for securities by major security type at December 31 are as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2004
Fixed maturities—
Held-to-maturity, at amortized cost:
Obligations of states and political subdivisions	$	2,202,635	$	127,494	$	—	$	2,330,129
Total	$	2,202,635	$	127,494	$	—	$	2,330,129
Fixed maturities—
Available-for-sale, at fair value:
Obligations of states and political subdivisions	$	62,831,726	$	1,547,127	$	91,373	$	64,287,480
Corporate debt securities		7,539,417		644,869		—		8,184,286
Total	$	70,371,143	$	2,191,996	$	91,373	$	72,471,766
Equity securities, available for sale at fair value—
Common stocks and nonredeemable preferred stocks	$	4,442,304	$	2,844,124	$	46,122	$	7,240,306
Total	$	4,442,304	$	2,844,124	$	46,122	$	7,240,306
Short term investments—
Certificates of deposit and other	$	10,134,321	$	—	$	—	$	10,134,321
Total	$	10,134,321	$	—	$	—	$	10,134,321
December 31, 2003
Fixed maturities—
Held-to-maturity, at amortized cost:
Obligations of states and political subdivisions	$	2,481,353	$	165,850	$	334	$	2,646,869
Total	$	2,481,353	$	165,850	$	334	$	2,646,869
Fixed maturities—
Available-for-sale, at fair value:
Obligations of states and political subdivisions	$	29,465,352	$	1,905,912	$	10,571	$	31,360,693
Corporate debt securities		12,707,043		1,032,784		—		13,739,827
Total	$	42,172,395	$	2,938,696	$	10,571	$	45,100,520
Equity securities, available for sale at fair value—
Common stocks and nonredeemable preferred stocks	$	11,289,005	$	2,268,786	$	1,006	$	13,556,785
Redeemable preferred stocks		1,000,000		—		—		1,000,000
Total	$	12,289,005	$	2,268,786	$	1,006	$	14,556,785
Short term investments—
Certificates of deposit and other	$	16,743,574	$	4,390	$	—	$	16,747,964
Total	$	16,743,574	$	4,390	$	—	$	16,747,964

The scheduled maturities of fixed maturity securities at December 31, 2004 are as follows:

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	1,001,392	$	1,011,687	$	—	$	—
Due after one year through five years		14,351,610		15,022,477		64,977		67,771
Due after five years through ten years		19,692,200		20,629,171		464,948		495,519
Due after ten years		35,325,941		35,808,431		1,672,710		1,766,839
Total	$	70,371,143	$	72,471,766	$	2,202,635	$	2,330,129

Earnings on investments and net realized gains for the years ended December 31 are as follows:

	2004		2003		2002
Fixed maturities	$	2,396,282	$	2,300,172	$	2,397,307
Equity securities		220,773		223,379		225,913
Invested cash and other short term investments		128,204		158,775		166,298
Miscellaneous interest		7,579		9,361		17,290
Net realized gain		93,656		258,718		279,301
Investment income	$	2,846,494	$	2,950,405	$	3,086,109

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

	2004			2003			2002
Gross realized gains:
Obligations of states and political subdivisions	$	9,633		$	117,600		$	5,909
Debt securities of domestic corporations		25,994			—			6,820
Common stocks and nonredeemable preferred stocks		147,042			253,753			405,449
Total		182,669			371,353			418,178
Gross realized losses:
Obligations of states and political subdivisions		(407	)		(2,464	)		(7,672	)
Common stocks and nonredeemable preferred stocks		(88,606	)		(110,171	)		(131,205	)
Total		(89,013	)		(112,635	)		(138,877	)
Net realized gain	$	93,656		$	258,718		$	279,301

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 unrealized loss position at December 31, 2004 were as follows:

	Less than 12 Months					12 Months or Longer					Total
December 31, 2004		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed securities	$	7,093,332	$	(85,367	)	$	498,720	$	(6,006	)	$	7,592,052	$	(91,373	)
Equity securities		659,999		(46,122	)		—		—			659,999		(46,122	)
Total temporary impaired  securities	$	7,753,331	$	(131,489	)	$	498,720	$	(6,006	)	$	8,252,051	$	(137,495	)

December 31, 2003		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Fixed securities	$	661,341	$	(10,571	)	$	100,345	$	(334	)	$	761,686	$	(10,905	)
Equity securities		131,275		(1,006	)		—		—			131,275		(1,006	)
Total temporary impaired  securities	$	792,616	$	(11,577	)	$	100,345	$	(334	)	$	892,961	$	(11,911	)

       A total of 17 and 5 securities had unrealized losses at December 31, 2004 and December 31, 2003, respectively, and the duration of these securities range from three to more than ten years. The majority of the Company’s unrealized losses relate to its portfolio of fixed securities. The Company’s unrealized losses on its fixed securities were caused by interest rate increases. Since the decline in fair value is attributable to changes in interest rates and not credit quality, and the Company has the intent and ability to hold these securities, the Company does not consider these investments other-than-temporarily impaired.

4. Property and Equipment

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

	2004			2003
Land	$	1,107,582		$	1,107,582
Title plant		200,000			200,000
Office buildings and improvements (25 years)		1,846,288			1,730,592
Furniture, fixtures and equipment (3 to 10 years)		6,837,261			5,657,659
Automobiles (3 years)		526,287			516,906
Total		10,517,418			9,212,739
Less accumulated depreciation		(5,924,634	)		(5,113,496	)
Property and equipment, net	$	4,592,784		$	4,099,243

5. Reinsurance

The Company assumes and cedes reinsurance with other insurance companies in the normal course of business. Premiums assumed and ceded were approximately $6,000 and $295,000, respectively, for 2004, $6,000 and $438,000, respectively, for 2003, and $21,000 and $348,000, respectively, for 2002. 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 three years ended December 31, 2004.

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:

	2004			2003			2002
Balance, beginning of year	$	30,031,000		$	25,630,000		$	21,460,000
Provision related to:
Current year		8,171,579			12,995,785			9,714,121
Prior years		(187,240	)		(3,703,046	)		(2,842,299	)
Total provision charged to operations		7,984,339			9,292,739			6,871,822
Claims paid, net of recoveries, related to:
Current year		(167,882	)		(680,357	)		(395,688	)
Prior years		(6,005,457	)		(4,211,382	)		(2,306,134	)
Total claims paid, net of recoveries		(6,173,339	)		(4,891,739	)		(2,701,822	)
Balance, end of year	$	31,842,000		$	30,031,000		$	25,630,000

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

7. Earnings Per Share and Stock Options

        The employee stock options are considered outstanding for the diluted earnings per common share calculation. The total increase in the weighted average shares outstanding related to these equivalent shares was 124,205, 120,814 and 80,651 for 2004, 2003 and 2002, respectively.

The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31:

	2004		2003		2002
Net income	$	10,719,166	$	10,965,014	$	8,108,842
Weighted average common shares outstanding - Basic		2,496,711		2,503,659		2,517,328
Incremental shares outstanding assuming     the exercise of dilutive stock options		124,205		120,814		80,651
Weighted average common shares outstanding - Diluted		2,620,916		2,624,473		2,597,979
Basic earnings per common share	$	4.29	$	4.38	$	3.22
Diluted earnings per common share	$	4.09	$	4.18	$	3.12

All outstanding options during 2004 were included in the computation of diluted earnings per share because the options’ exercise prices were less than or equal to the average market price of the common shares. Options to purchase 29,600 and 69,386 shares of common stock were outstanding during 2003 and 2002, respectively, but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares.

A summary of the status of the Company’s plans as of December 31 and changes during the years ended on those dates is presented below:

	2004					2003					2002
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		264,891		$	16.09		298,741		$	15.68		291,835		$	15.08
Granted		7,200			28.92		22,500			23.39		28,650			19.40
Exercised		(13,860	)		16.38		(27,150	)		15.27		(15,604	)		11.49
Forfeited		(11,450	)		15.99		(29,200	)		18.28		(6,140	)		15.04
Outstanding at end of year		246,781		$	16.45		264,891		$	16.09		298,741		$	15.68
Options exercisable at year-end		176,696		$	15.15		157,851		$	15.18		145,156		$	15.22

The following table summarizes information about fixed stock options outstanding at December 31, 2004: 

	Options Outstanding at Year-End				Options Exercisable at Year-End
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life		Weighted Average Exercise Price	Number Exercisable		Weighted Average Exercise Price
$10.00-$12.00	57,595	3	$	11.10	38,520	$	10.99
13.06-  15.58	115,030	1		13.28	106,250		13.14
17.25-  19.35	4,690	7		18.93	1,015		19.12
20.00-  22.75	23,726	7		21.15	6,106		20.94
25.28-  31.27	45,740	5		28.49	24,805		28.66
$10.00-$31.27	246,781	3	$	16.45	176,696	$	15.15

8. Income Taxes

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

	2004		2003			2002
Current:
Federal	$	4,442,000	$	5,900,000		$	4,425,000
State		191,000		92,000			41,000
Total		4,633,000		5,992,000			4,466,000
Deferred expense (benefit)		150,000		(786,000	)		(906,000	)
Total	$	4,783,000	$	5,206,000		$	3,560,000

For state income tax purposes, ITIC and NE-ITIC generally pay only a gross premium tax.

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

	2004		2003
Deferred income tax assets:
Recorded reserves for claims net of statutory premium reserves	$	1,482,271	$	1,795,692
Accrued benefits and retirement reserves		1,003,020		731,048
Reinsurance and commissions payable		96,586		111,767
Bad debt reserve		761,600		841,160
Net operating loss carryforward		51,000		—
Other		74,650		59,224
Total		3,469,127		3,538,891
Deferred income tax liabilities:
Net unrealized gain on investments		1,663,447		1,768,477
Excess of tax over book depreciation		270,864		237,974
Discount accretion on tax-exempt obligations		24,251		27,768
Other		70,318		19,455
Total		2,028,880		2,053,674
Net deferred income tax assets	$	1,440,247	$	1,485,217

At December 31, 2004 and 2003, 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 net 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:

	2004			2003			2002
Anticipated income tax expense	$	5,270,736		$	5,498,145		$	3,967,406
Increase (reduction) related to:
State income taxes, net of the federal income tax benefit		126,060			55,625			25,740
Tax-exempt interest income (net of amortization)		(638,049	)		(441,763	)		(461,300	)
Other, net		24,253			93,993			28,154
Provision for income taxes	$	4,783,000		$	5,206,000		$	3,560,000

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 $746,000, $635,000 and $643,000 in 2004, 2003 and 2002, 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, 2004 are summarized as follows:

Year End:
2005	$	627,763
2006		292,933
2007		147,188
2008		9,856
2009		4,944
Total	$	1,082,684

10. Retirement and Other Postretirement Benefit Plans

After three years of service, employees are eligible to participate in a Simplified Employee Pension Plan. Contributions, which are made at the discretion of the Company, are based on the employee’s salary, but in no case will such contribution exceed $41,000 annually per employee. All contributions are deposited in Individual Retirement Accounts for participants. Contributions expensed under the plan were approximately $572,000, $533,000 and $475,000 for 2004, 2003 and 2002, 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 the Chief Operating Officer of ITIC. These individuals also serve as the Chief Executive Officer, 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 agreements provide for annual salaries to be fixed by the Compensation Committee and, among other benefits. ITIC shall make quarterly contributions pursuant to a supplemental executive retirement plan on behalf of each executive equal to 22% of the base salary and bonus paid to each during such quarter. The 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 these plans at December 31, 2004 and 2003 was $1,185,000 and $452,000, respectively, which includes post retirement compensation and health benefits, and was calculated based on the terms of the contract. These executive contracts are accounted for on an individual contract basis.

On November 17, 2003, Investors Title Insurance Company 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 plan is unfunded.

Cost of the Company’s post-retirement benefit plan included the following components:

	2004			2003
Net periodic benefit cost
Service cost – benefits earned during the year	$	14,051		$	55,000
Interest cost on projected benefit obligation		15,499			—
Transition obligation		—			—
Amendment cost		14,485			—
Actuarial loss (gain)		—			—
Net periodic benefit cost at end of year	$	44,035		$	55,000
Funded status
Actuarial present value of future benefits:
Fully eligible active employee	$	(32,710	)	$	(55,000	)
Non-eligible active employees		(206,044	)		—
Fair market value of plan assets		—			—
Funded status of accumulated pension benefit obligation		(238,754	)		(55,000	)
Unrecognized transition obligation		—			—
Unrecognized prior service cost		175,515			—
Unrecognized gain		(35,796	)		—
Accumulated benefit obligation at end of year	$	(99,035	)	$	(55,000	)

Development of the accumulated post-retirement benefit obligation for the year ended December 31, 2004 includes the following:

	2004		2003
Accumulated benefit obligation at beginning of year	$	55,000	$	—
Service cost – benefits earned during the year		14,051		55,000
Interest cost on projected benefit obligation		15,499		—
Amendment cost		14,485		—
Accumulated benefit obligation at end of year	$	99,035	$	55,000

Weighted-average actuarial assumptions used to determine benefit obligations at December 31 were:

	2004			2003
Discount rate		5.75	%		6.00	%
Expected return on plan assets		N/A			N/A
Expected medical cost increase		5-12	%		5-10	%
Expected dental and vision cost increase		5	%		5	%

Assumed health care cost trend rates do have an effect on the amounts reported for the post-retirement benefit plan. The following illustrates the effects on the net periodic post-retirement benefit cost (NPPBC) and the accumulated post-retirement 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, 2004:

	1-Percentage point increase		1-Percentage point decrease
1. NPPBC
Effect on the service cost component	$	4,137	$	(3,070	)
Effect on interest cost		3,483		(2,619	)
Total effect on the net periodic post-retirement benefit cost	$	7,620	$	(5,689	)
2. APBO (including active employees who are not fully eligible)
Effect on those currently receiving benefits (retirees and spouses)	$	—	$	—
Effect on actives fully eligible		3,008		(2,659	)
Effect on actives not yet eligible		57,556		(42,888	)
Total effect on the accumulated post-retirement benefit obligation	$	60,564	$	(45,547	)

11. Commitments and Contingencies

The Company and its subsidiaries are involved in various routine 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.

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.

Stockholders’ equity on a statutory basis was $66,262,421 and $55,139,781 as of December 31, 2004 and 2003, respectively. Net income on a statutory basis was $9,292,197, $10,344,810 and $8,466,841 for the twelve months ended December 31, 2004, 2003 and 2002, respectively. The Company’s subsidiaries complied with all applicable state insurance department requirements on December 31, 2004.

13. Segment Information

Consistent with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company has aggregated its operating segments into two reportable segments: 1) title insurance services; and 2) tax-deferred exchange services.

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.

The tax-deferred exchange segment acts as an intermediary in tax-deferred exchanges of property held for productive use in a trade or business or for investments and serves as exchange accommodation titleholder, holding property for exchangers in reverse exchange transactions. Revenues are derived from fees for handling exchange transactions.

Provided below is selected financial information about the Company’s operations by segment for the three years ended December 31, 2004, 2003 and 2002:

	Title Insurance		Exchange Services			All Other		Intersegment Elimination			Total
2004
Operating revenues	$	72,874,630	$	2,801,888	$	1,921,114		$	(602,950	)	$	76,994,682
Investment income		2,651,291		7,821		147,662			(53,936	)		2,752,838
Net realized gain on sales of investments		106,156		—		(12,500	)		—			93,656
Total revenues	$	75,632,077	$	2,809,709	$	2,056,276		$	(656,886	)	$	79,841,176
Operating expenses		62,035,935		646,758		2,259,267			(602,950	)		64,339,010
Income (loss) before income taxes	$	13,596,142	$	2,162,951	$	(202,991	)	$	(53,936	)	$	15,502,166
Assets	$	96,880,761	$	1,316,413	$	14,989,578		$	—		$	113,186,752
2003
Operating revenues	$	85,704,635	$	1,245,234	$	1,586,529		$	(656,932	)	$	87,879,466
Investment income		2,631,506		2,818		99,641			(42,278	)		2,691,687
Net realized gain on sales of investments		258,718		—		—			—			258,718
Total revenues	$	88,594,859	$	1,248,052	$	1,686,170		$	(699,210	)	$	90,829,871
Operating expenses		73,444,721		495,119		1,375,949			(656,932	)		74,658,857
Income (loss) before income taxes	$	15,150,138	$	752,933	$	310,221		$	(42,278	)	$	16,171,014
Assets	$	90,844,552	$	626,771	$	9,000,488		$	—		$	100,471,811
2002
Operating revenues	$	68,291,735	$	947,426	$	1,124,530		$	(597,460	)	$	69,766,231
Investment income		2,749,019		6,114		93,807			(42,132	)		2,806,808
Net realized gain on sales of investments		279,301		—		—			—			279,301
Total revenues	$	71,320,055	$	953,540	$	1,218,337		$	(639,592	)	$	72,852,340
Operating expenses		60,241,962		441,386		1,097,610			(597,460	)		61,183,498
Income (loss) before income taxes	$	11,078,093	$	512,154	$	120,727		$	(42,132	)	$	11,668,842
Assets	$	76,067,241	$	386,419	$	8,183,486		$	—		$	84,637,146

14. Stockholders’ Equity

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 Series A Junior Participating Preferred Stock. The Class A Junior Participating 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 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. Following an 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. Subsequent Events

On January 11, 2005, three executives of the Company exercised nonqualified stock options. Shares issued under these options were immediately purchased by ITIC under the existing Stock Repurchase Plan approved by the Board of Directors on June 5, 2000. This repurchase resulted in compensation expense totaling $598,484 during the first quarter of 2005.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Investors Title Company

We have audited the accompanying consolidated balance sheet of Investors Title Company and its subsidiaries (the “Company”) as of December 31, 2004, and the related consolidated statements of income, stockholders’ equity, comprehensive income and cash flows for the year ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 the Company as of December 31, 2004, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Dixon Hughes PLLC
High Point, North Carolina
March 7, 2005

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Investors Title Company

We have audited the accompanying consolidated balance sheets of Investors Title Company and its subsidiaries (the “Company”) as of December 31, 2003 and 2002, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP
Raleigh, North Carolina
March 25, 2004

EX-23.A

Exhibit 23 (a)

Consent of Independent Registered Public Accounting Firm and Report on Schedules

We consent to the use in Registration Statement No. 333-33903 of Investors Title Company (the “Company”) and Subsidiaries on Form S-8 of our report dated March 7, 2005, incorporated by reference in this Annual Report on Form 10-K of the Company for the year ended December 31, 2004.

Our audit of the consolidated financial statements referred to in our aforementioned report also included the financial statement schedules of the Company, listed in Item 15 as of and for the year ended December 31, 2004. These financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audit. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects, the information set forth herein.

/s/DIXON HUGHES PLLC
High Point, North Carolina
March 16, 2005

EX-23.B

Exhibit 23 (b)

Consent of Independent Registered Public Accounting Firm and Report on Schedules

We consent to the incorporation by reference in Registration Statement No. 333-33903 on Form S-8 of our report dated March 25, 2004, appearing in this Annual Report on Form 10-K of Investors Title Company for the year ended December 31, 2004.

Our audits of the consolidated financial statements referred to in our aforementioned report also included the financial statement schedules of the Company, listed in Item 15. These financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statements schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP
Raleigh, North Carolina
March 16, 2005

EX-31.I

Exhibit 31(i)

Certification

I, J. Allen Fine, certify that:

1.	I have reviewed this annual report on Form 10-K of Investors Title Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
	a)     designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c)     disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
	a)     all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2005

/s/ J. Allen Fine

———————

J. Allen Fine
Chief Executive Officer

EX-31.II

          Exhibit 31(ii)

Certification

I, James A. Fine, Jr., certify that:

1.	I have reviewed this annual report on Form 10-K of Investors Title Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
	a)     designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	c)     disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
	a)     all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2005

/s/ James A. Fine, Jr.

—————————

James A. Fine, Jr.
Chief Financial Officer

EX-32

Exhibit 32

Certifications
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Investors Title Company, a North Carolina corporation (the “Company”), does hereby certify that:

                (i) The Annual Report on Form 10-K for the year ended December 31, 2004 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

                (ii) information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:    March 16, 2005	/s/ J. Allen Fine
	———————
	J. Allen Fine
	Chief Executive Officer
Dated:    March 16, 2005	/s/ James A. Fine, Jr.
	—————————
	James A. Fine, Jr.
	Chief Financial Officer

COVER

INVESTORS TITLE COMPANY
COVER LETTER

VIA EDGAR Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC  20549
Re:	Investors Title Company
	Form 10-K
	File No. 0-11774

To Whom It May Concern:

               Pursuant to Regulation S-T of the Securities and Exchange Commission, Investors Title Company files herewith via EDGAR its Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

               Please be advised that the financial statements in the Annual Report do not reflect any change from the preceding year in any accounting principles or practices or in the method of applying such principles or practices.

Sincerely,

INVESTORS TITLE COMPANY

/s/ James A. Fine, Jr.

James A. Fine, Jr.

President and Treasurer