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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. Generally, the first quarter has the least real estate activity, while the remaining quarters are more active. Fluctuations in mortgage interest rates can cause shifts in real estate activity outside of the normal seasonal pattern, especially as these changes relate to refinance activity. 

$^{ }$Exchange Services:  Seasonal factors affecting the level of real estate activity and the volume of title insurance premiums written will also affect the demand for exchange services. 

## $^{ }$INVESTMENT INCOME 

Investments are an integral part of the Company' s business. 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 debt 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 16.2%, 18.6% and 12.7% in 2000, 1999 and 1998, respectively. These increases were primarily attributable to increases in the average investment portfolio balances. 

## $^{ }$EXPENSES 

A summary by segment of the Company' s operating expenses is as follows: 

<img src='content_image/50006.jpg'>

On a consolidated basis, profit margins were 7.44%, 9.33% and 11.26% in 2000, 1999 and 1998, respectively. The decrease of 14% in net premiums written coupled with a smaller decrease of only 7% in operating expenses contributed to the decline in profit margin for 2000. Expenses increased due to investments in technology and costs associated with entering and supporting new market areas. 

