MD&A  $^{ }$OVERVIEW The following discussion should be read in conjunction with the consolidated financial  statements and the related footnotes on pages 12-22 of this report.  Investors Title Company (the "Company") engages primarily in two segments of business. The  main business activity is the issuance of title insurance through two title insurance subsidiaries,  Investors Title Insurance Company ("ITIC") and Northeast Investors Title Insurance Company  ("NE-ITIC"). Factors which influence the land title business include mortgage interest rates, the  availability of mortgage funds, the level of real estate activity, the cost of real estate, consumer  confidence, the supply and demand of real estate, inflation and general economic conditions. The  Company' s second segment provides tax-free exchange services through its two 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. ITAC serves as exchange accommodation titleholder in reverse exchanges.  During the past three years, the overall economic environment coupled with relatively low  mortgage interest rates has favorably impacted the level of real estate activity. In 1999 and 1998,  these factors contributed to two consecutive years of record levels of new and existing home  sales. According to the Freddie Mac Weekly Mortgage Rate Survey, the monthly average 30- year fixed mortgage interest rates were reported to be 8.05%, 7.44% and 6.94% in 2000, 1999  and 1998, respectively. Based on data published by the Mortgage Bankers Association, housing  starts were 1.6 million, 1.67 million and 1.62 million in 2000, 1999 and 1998, respectively. New  and existing home sales were 6.03 million, 6.1 million and 5.85 million in 2000, 1999 and 1998,  respectively.  During 1998, the monthly average 30-year fixed mortgage interest rates started out at 7.1% and  ended the year at 6.74%. The overall decline in interest rates spurred an increase in real estate  sales, which was a contributing factor to the increase of $15,504,346 in the Company' s 1998 net  premiums written compared with 1997 net premiums written. In 1999, the monthly average 30- year fixed mortgage interest rates climbed steadily, starting the year at 6.74% and ending at  7.91%. The increase in mortgage interest rates resulted in a slowdown in mortgage originations  and a dramatic decline in refinance activity. The higher level of interest rates and resulting drop  in refinance lending contributed substantially to the decrease of $1,560,131 in premiums written  in 1999 compared with 1998 premiums written.  In January of 2000, the monthly average 30-year fixed mortgage interest rate was 8.21%; it rose  to 8.52% by May, and then began a steady decline to end the year at 7.38%. The higher level of  interest rates in the first half of the year contributed to the decrease of $6,128,813 in premiums  written in 2000 compared with 1999 premiums written. During the fourth quarter of 2000,  premium volume began to improve due to declining mortgage interest rates. Management cannot  predict the future level of mortgage interest rates nor the impact such rates will have on home  sales, housing starts, mortgage lending or other real estate activity. The Company strives to  offset the cyclical nature of the real estate market by increasing its market share. This effort  includes expanding into new markets primarily by continuing to develop agency relationships, as  10 © Investors Title Company 