Title Insurance:  Profit margins for the title insurance segment were 6.02%, 8.39% and 10.48%  in 2000, 1999 and 1998, respectively. The decrease in premiums written, an increase in the  percentage of business received from agents and the fixed nature of certain operating expenses  contributed to the decline in profit margins. Profit margins from agent business are typically  lower than those from branch business since agent commissions are generally higher than the  operating expenses incurred for direct business. In order to maintain and improve margins, the  Company strives to identify opportunities to refine operating procedures and to implement  programs designed to reduce expenses. Commissions decreased 9.2% and 2% in 2000 and 1999,  respectively and increased 72.9% in 1998. Overall, commission expense as a percentage of agent  premiums written has remained relatively constant for the last three years. Commission rates  vary geographically and may be influenced by state regulations.  The provision for claims as a percentage of net premiums written was 15.6%, 13.8% and 17.8%  in 2000, 1999 and 1998, respectively. The provision reflects actual payments of claims, net of  recovery amounts, plus adjustments to the claims reserves, which are actuarially determined  based on historical claims experience. Payments of claims, net of recoveries, were $3,785,355,  $3,524,064 and $2,354,425 in 2000, 1999 and 1998, respectively.  The Company has continued to strengthen its reserves for claims. At December 31, 2000, the  total reserves for claims were $17,944,665. Of that total, $2,410,360 was reserved for specific  claims, and $15,534,305 was reserved for claims for which the Company had no notice.  Management relies on actuarial techniques to estimate future claims by analyzing historical  claim payment patterns. Claims reserves are reviewed and certified as to their adequacy by  independent actuaries annually. There are no known claims which are expected to have a  materially adverse effect on the Company' s financial position.  On a consolidated basis, salaries and employee benefits as a percentage of net premiums written  were 25.5%, 22.5% and 18.2% in 2000, 1999 and 1998, respectively. These expenses have risen  due to staff increases in the information systems and business development areas. The title  insurance segment' s total salaries and employee benefits accounted for 95%, 98% and 99% of  total salaries for 2000, 1999 and 1998, respectively. On a consolidated basis, office occupancy  and operations as a percentage of net premiums was 9.5%, 9.7% and 7.1% in 2000, 1999 and  1998, respectively. The title insurance segment' s total office occupancy and operations accounted  for 93.5%, 94.9% and 94.9% in 2000, 1999 and 1998, respectively.  Premium and retaliatory taxes decreased 13% and 2.1% in 2000 and 1999, respectively and  increased 48.6% in 1998, in direct proportion to the fluctuations in premium volume.  Exchange Services:  The exchange services segment' s total operating expenses as a percentage  of the Company' s total expenses were .6%, .4% and .3% for 2000, 1999 and 1998, respectively.  The increase in operating expenses was due to the growth in revenues.  © Investors Title Company  14