CHICAGO, April 23, 2020 /PRNewswire/ -- Old Republic
International Corporation (NYSE: ORI) today reported the following
consolidated results (a):
OVERALL
RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended March
31,
|
|
2020
|
|
2019
|
|
% Change
|
Pretax income
(loss)
|
$
|
(769.9)
|
|
|
$
|
518.5
|
|
|
|
Pretax investment
gains (losses)
|
(944.1)
|
|
|
368.0
|
|
|
|
Pretax income (loss)
excluding investment gains (losses)
|
$
|
174.2
|
|
|
$
|
150.4
|
|
|
15.8
|
%
|
|
|
|
|
|
|
Net income
(loss)
|
$
|
(604.8)
|
|
|
$
|
412.2
|
|
|
|
Net of tax investment
gains (losses)
|
(745.6)
|
|
|
290.6
|
|
|
|
Net income (loss)
excluding investment gains (losses)
|
$
|
140.8
|
|
|
$
|
121.5
|
|
|
15.8
|
%
|
|
|
|
|
|
|
PER DILUTED
SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended March
31,
|
|
2020
|
|
2019
|
|
% Change
|
Net income
(loss)
|
$
|
(2.01)
|
|
|
$
|
1.37
|
|
|
|
Net of tax investment
gains (losses)
|
(2.48)
|
|
|
.97
|
|
|
|
Net income (loss)
excluding investment gains (losses)
|
$
|
.47
|
|
|
$
|
.40
|
|
|
17.5
|
%
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
March 31,
|
|
Dec. 31,
|
|
|
|
2020
|
|
2019
|
|
% Change
|
Shareholders' equity:
Total
|
$
|
5,142.9
|
|
|
$
|
6,000.1
|
|
|
-14.3
|
%
|
Per Common
Share
|
$
|
17.29
|
|
|
$
|
19.98
|
|
|
-13.5
|
%
|
_______________
|
(a) All amounts in
this report are stated in millions except common stock data and
percentages.
|
Consolidated pretax and net income, exclusive of all investment
gains or (losses), for the quarter ended March 31, 2020 grew by 15.8%, or 17.5% per
diluted share. Consolidated results were driven by greater
profitability in Old Republic's Title Insurance segment. Total and
per share net income were significantly impacted by changes in the
fair value of equity securities. Please see the information on
pages 2 and 3.
The impact on U.S. economic activity from the COVID-19 pandemic
and the associated governmental responses occurred in the final
weeks of the first quarter. Therefore, there was minimal effect on
Old Republic's first quarter operating revenues and earnings
excluding investment gains or (losses). The impact on employment
levels, businesses and other economic activities could have a
negative effect on future premium and fee revenues in the General
Insurance segment, and such possible outcomes could give rise to
higher underwriting expense ratios. Similarly, the impact on the
residential and commercial real estate markets could lessen demand
for title insurance products and services. In these circumstances,
future revenues from title premiums and fees in the Title Insurance
segment could decline, and conversely operating expense ratios
could rise. In the RFIG Run-off segment, future claims
experience could depend upon the mitigating effects of loan
forbearance programs mandated by the Federal government, and the
rate at which the overall U.S. economy, and in particular
employment levels recover.
The COVID-19 pandemic and the associated governmental responses
caused substantial financial markets disruption in the final weeks
of the first quarter, which led to significant declines in stock
market valuations generally, and for Old Republic's common stock
portfolio as well. Declines in the fair value of the Company's
common stock holdings were the main contributor to the first
quarter's reported net loss and the reduction in book value per
share to $17.29 at quarter's end from
$19.98 at year-end 2019. These
outcomes notwithstanding, management firmly believes that the
Company's strong financial condition will enable it to weather
these challenging times, and most importantly allow its insurance
subsidiaries to meet their obligations to customers, policyholders
and their beneficiaries.
Old Republic's business is necessarily managed for the long run.
In this context management's key objectives are to achieve a
continuous, long-term improvement in operating results, and to
ensure balance sheet strength for the primary needs of the
insurance subsidiaries' underwriting and related services business.
In this view, the evaluation of periodic and long-term results
excludes consideration of all investment gains or (losses). Under
Generally Accepted Accounting Principles ("GAAP"), however, net
income (loss), which includes all specifically defined realized and
unrealized investment gains or (losses), is the measure of total
profitability.
In management's opinion, the focus on income (loss) excluding
all investment gains and losses provides a better way to
realistically analyze, evaluate, and establish accountability for
the results and benefits that arise from the basic operations of
the business. The inclusion of realized investment gains or
(losses) in income (loss) can mask the reality and trends in the
fundamental operating results of the insurance business. That is
because their realization is, more often than not, highly
discretionary. It is usually affected by such randomly occurring
factors as the timing of individual securities sales, tax-planning
considerations, and modifications of investment management
judgments about the direction of securities markets or the
prospects of individual investees or industry sectors. Moreover,
the inclusion of unrealized investment gains or (losses) in equity
securities required under GAAP can further distort such operating
results and trends therein and thus lead to even greater
period-to-period fluctuations in reported net income (loss). The
impact of the continuous volatility in stock market valuations is
most evident in its net of tax effect on net income (loss) for the
periods reported upon.
FINANCIAL
HIGHLIGHTS
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Quarters Ended March
31,
|
|
SUMMARY INCOME
STATEMENTS:
|
2020
|
|
2019
|
|
% Change
|
|
Revenues:
|
|
|
|
|
|
|
Net premiums and fees
earned
|
$
|
1,496.8
|
|
|
$
|
1,358.1
|
|
|
10.2
|
%
|
|
Net investment
income
|
114.1
|
|
|
112.1
|
|
|
1.8
|
|
|
Other
income
|
34.6
|
|
|
30.4
|
|
|
14.1
|
|
|
Total operating
revenues
|
1,645.7
|
|
|
1,500.6
|
|
|
9.7
|
|
|
Investment gains
(losses):
|
|
|
|
|
|
|
Realized from actual
transactions
|
18.5
|
|
|
12.3
|
|
|
|
|
Realized from
impairments
|
—
|
|
|
—
|
|
|
|
|
Unrealized from
changes in fair value of equity securities
|
(962.7)
|
|
|
355.6
|
|
|
|
|
Total investment
gains (losses)
|
(944.1)
|
|
|
368.0
|
|
|
|
|
Total
revenues
|
701.5
|
|
|
1,868.6
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Claim
costs
|
622.6
|
|
|
606.0
|
|
|
2.7
|
|
|
Sales and general
expenses
|
836.9
|
|
|
733.4
|
|
|
14.1
|
|
|
Interest and other
charges
|
11.9
|
|
|
10.6
|
|
|
11.7
|
|
|
Total operating
expenses
|
1,471.5
|
|
|
1,350.1
|
|
|
9.0
|
%
|
|
Pretax income
(loss)
|
(769.9)
|
|
|
518.5
|
|
|
|
|
Income taxes
(credits)
|
(165.1)
|
|
|
106.2
|
|
|
|
|
Net income
(loss)
|
$
|
(604.8)
|
|
|
$
|
412.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCK
STATISTICS:
|
|
|
|
|
|
|
Net income (loss)
per share: Basic
|
$
|
(2.01)
|
|
|
$
|
1.38
|
|
|
|
|
Diluted
|
$
|
(2.01)
|
|
|
$
|
1.37
|
|
|
|
|
Components of net
income (loss) per share:
|
|
|
|
|
|
|
Basic net
income (loss) excluding investment gains (losses)
|
$
|
0.47
|
|
|
$
|
0.41
|
|
|
14.6
|
%
|
|
Net investment gains
(losses):
|
|
|
|
|
|
|
Realized from actual
transactions and impairments
|
0.05
|
|
|
0.03
|
|
|
|
|
Unrealized from
changes in fair value of equity securities
|
(2.53)
|
|
|
0.94
|
|
|
|
|
Basic net income
(loss)
|
$
|
(2.01)
|
|
|
$
|
1.38
|
|
|
|
|
Diluted net
income (loss) excluding investment gains (losses)
|
$
|
0.47
|
|
|
$
|
0.40
|
|
|
17.5
|
%
|
|
Net investment gains
(losses):
|
|
|
|
|
|
|
Realized from actual
transactions and impairments
|
0.05
|
|
|
0.03
|
|
|
|
|
Unrealized from
changes in fair value of equity securities
|
(2.53)
|
|
|
0.94
|
|
|
|
|
Diluted net income
(loss)
|
$
|
(2.01)
|
|
|
$
|
1.37
|
|
|
|
|
Cash dividends on
common stock
|
$
|
0.21
|
|
|
$
|
0.20
|
|
|
|
|
Book value per
share
|
$
|
17.29
|
|
|
$
|
18.94
|
|
|
-8.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
The table on the next page shows an array of numbers
purposefully arranged in 10 sections. Management believes the
information in sections A to G and J highlight the most meaningful,
realistic indicators of ORI's segmented and consolidated financial
performance. The information underscores the necessity of reviewing
reported results by separating the inherent volatility of
securities markets and their above-noted impact on reported GAAP
net income (loss).
|
Major Segmented
and Consolidated
|
|
Elements of Income
(Loss)
|
|
Quarters Ended March
31,
|
|
2020
|
|
2019
|
|
% Change
|
A. Net premiums,
fees, and other income:
|
|
|
|
|
|
General
insurance
|
$
|
852.8
|
|
|
$
|
831.5
|
|
|
2.6
|
%
|
Title
insurance
|
628.1
|
|
|
506.9
|
|
|
23.9
|
|
Corporate
and other
|
3.1
|
|
|
3.4
|
|
|
-9.0
|
|
Other
income
|
34.6
|
|
|
30.4
|
|
|
14.1
|
|
Subtotal
|
1,518.9
|
|
|
1,372.2
|
|
|
10.7
|
|
RFIG
run-off business (c)
|
12.6
|
|
|
16.2
|
|
|
-22.1
|
|
Consolidated
|
$
|
1,531.5
|
|
|
$
|
1,388.5
|
|
|
10.3
|
%
|
|
|
|
|
|
|
B. Underwriting
and related
|
|
|
|
|
|
services income
(loss):
|
|
|
|
|
|
General
insurance
|
$
|
37.5
|
|
|
$
|
38.8
|
|
|
-3.4
|
%
|
Title
insurance
|
33.3
|
|
|
11.6
|
|
|
186.8
|
|
Corporate
and other
|
(2.9)
|
|
|
(5.2)
|
|
|
42.5
|
|
Subtotal
|
67.9
|
|
|
45.2
|
|
|
50.0
|
|
RFIG
run-off business (c)
|
4.0
|
|
|
3.7
|
|
|
8.2
|
|
Consolidated
|
$
|
71.9
|
|
|
$
|
49.0
|
|
|
46.8
|
%
|
C. Consolidated
underwriting ratio:
|
|
|
|
|
|
Claim
ratio
|
41.6
|
%
|
|
44.6
|
%
|
|
|
Expense
ratio
|
53.3
|
|
|
51.4
|
|
|
|
Composite
ratio
|
94.9
|
%
|
|
96.0
|
%
|
|
|
|
|
|
|
|
|
D. Net investment
income:
|
|
|
|
|
|
General
insurance
|
$
|
90.6
|
|
|
$
|
88.2
|
|
|
2.7
|
%
|
Title
insurance
|
10.8
|
|
|
10.2
|
|
|
5.2
|
|
Corporate
and other
|
8.3
|
|
|
9.0
|
|
|
-7.4
|
|
Subtotal
|
109.8
|
|
|
107.5
|
|
|
2.1
|
|
RFIG
run-off business
|
4.3
|
|
|
4.5
|
|
|
-3.8
|
|
Consolidated
|
$
|
114.1
|
|
|
$
|
112.1
|
|
|
1.8
|
%
|
E. Interest and
other charges (credits):
|
|
|
|
|
|
General
insurance
|
$
|
18.0
|
|
|
$
|
18.7
|
|
|
|
Title
insurance
|
0.8
|
|
|
1.3
|
|
|
|
Corporate
and other (a)
|
(6.9)
|
|
|
(9.4)
|
|
|
|
Subtotal
|
11.9
|
|
|
10.6
|
|
|
|
RFIG
run-off business
|
—
|
|
|
—
|
|
|
|
Consolidated
|
$
|
11.9
|
|
|
$
|
10.6
|
|
|
11.7
|
%
|
|
|
|
|
|
|
F. Segmented and
consolidated pretax income (loss)
|
|
|
|
|
|
excluding investment gains
(losses)(B+D-E):
|
|
|
|
|
|
General
insurance
|
$
|
110.1
|
|
|
$
|
108.3
|
|
|
1.7
|
%
|
Title
insurance
|
43.3
|
|
|
20.5
|
|
|
110.6
|
|
Corporate
and other
|
12.3
|
|
|
13.2
|
|
|
-7.2
|
|
Subtotal
|
165.7
|
|
|
142.1
|
|
|
16.6
|
|
RFIG
run-off business (c)
|
8.4
|
|
|
8.2
|
|
|
1.6
|
|
Consolidated
|
174.2
|
|
|
150.4
|
|
|
15.8
|
%
|
Income taxes
(credits) on above (b)
|
33.3
|
|
|
28.8
|
|
|
|
G. Net income
(loss) excluding investment gains (losses)
|
140.8
|
|
|
121.5
|
|
|
15.8
|
%
|
H. Consolidated
pretax investment gains (losses):
|
|
|
|
|
|
Realized
from actual transactions
|
|
|
|
|
|
and impairments
|
18.5
|
|
|
12.3
|
|
|
|
Unrealized from changes in
|
|
|
|
|
|
fair value of equity
securities
|
(962.7)
|
|
|
355.6
|
|
|
|
Total
|
(944.1)
|
|
|
368.0
|
|
|
|
Income taxes
(credits) on above
|
(198.5)
|
|
|
77.4
|
|
|
|
Net of tax
investment gains (losses)
|
(745.6)
|
|
|
290.6
|
|
|
|
I. Net
income (loss)
|
$
|
(604.8)
|
|
|
$
|
412.2
|
|
|
|
J. Consolidated
operating cash flow
|
$
|
216.3
|
|
|
$
|
136.2
|
|
|
|
|
|
|
|
|
|
(a) Includes
consolidation/elimination entries. (b) The effective tax rate
applicable to pretax income excluding investment gains or losses
was 19.2% for both the first quarters of 2020 and 2019. (c) See
Note (a) in RFIG Run-off Segments Results on page (6).
|
|
General Insurance
Segment Results
|
|
|
General Insurance
Summary
Operating Results
|
|
Quarters Ended March
31,
|
|
2020
|
|
2019
|
|
% Change
|
Net premiums
written
|
$
|
860.7
|
|
|
$
|
842.8
|
|
|
2.1
|
%
|
Net premiums
earned
|
852.8
|
|
|
831.5
|
|
|
2.6
|
|
Net investment
income
|
90.6
|
|
|
88.2
|
|
|
2.7
|
|
Other
income
|
34.5
|
|
|
30.2
|
|
|
14.0
|
|
Operating
revenues
|
978.0
|
|
|
950.0
|
|
|
2.9
|
|
Claim
costs
|
595.4
|
|
|
580.3
|
|
|
2.6
|
|
Sales and general
expenses
|
254.4
|
|
|
242.5
|
|
|
4.9
|
|
Interest and other
charges
|
18.0
|
|
|
18.7
|
|
|
-4.1
|
|
Operating
expenses
|
867.9
|
|
|
841.7
|
|
|
3.1
|
|
Segment pretax
operating income (loss)
|
$
|
110.1
|
|
|
$
|
108.3
|
|
|
1.7
|
%
|
|
|
|
|
|
|
Claim
ratio
|
69.8
|
%
|
|
69.8
|
%
|
|
|
Expense
ratio
|
25.8
|
|
|
25.5
|
|
|
|
Composite
ratio
|
95.6
|
%
|
|
95.3
|
%
|
|
|
____________
|
Effective July 1,
2019, the results of the CCI run-off business are being classified
in the General Insurance Segment for all future
periods.
|
General insurance earned premiums rose 2.6% in the first
quarter. With few exceptions, premiums grew for most types of
coverages and markets served. The largest contributions principally
stemmed from commercial automobile (trucking) and executive
indemnity coverages. The cumulative effects of recent years' and
ongoing premium rate increases for most insurance products, other
than workers' compensation coverages, along with new business
production were main factors in top line growth. Net investment
income growth was principally driven by a moderately higher
invested asset base with dividends from equity security investments
providing the greatest gain.
As the above table shows, the consolidated general insurance
ratio of claim costs to net premiums earned for the first quarter
of 2020 was consistent with 2019 and continues the past several
years' fairly consistent downtrends, and the effects of claim
development shown in the following table. Small year-over-year
changes in periodic expense ratios are generally reflective of
ongoing coverage mix dynamics, and the variability of attendant
sales and general expenses among various coverages.
|
|
|
|
|
Effect of Prior
Periods'
|
|
|
|
|
|
|
|
|
|
(Favorable)/
|
|
Claim Ratio
Excluding
|
|
Reported
|
|
Unfavorable
Claim
|
|
Prior Periods'
Claim
|
|
Claim
Ratio
|
|
Reserves
Development
|
|
Reserves
Development
|
2015
|
|
74.1
|
%
|
|
|
|
1.5
|
%
|
|
|
|
72.6
|
%
|
|
2016
|
|
73.0
|
|
|
|
|
0.3
|
|
|
|
|
72.7
|
|
|
2017
|
|
71.8
|
|
|
|
|
0.7
|
|
|
|
|
71.1
|
|
|
2018
|
|
72.2
|
|
|
|
|
—
|
|
|
|
|
72.2
|
|
|
2019
|
|
71.8
|
%
|
|
|
|
0.4
|
%
|
|
|
|
71.4
|
%
|
|
1st Quarter
2019
|
|
69.8
|
%
|
|
|
|
(1.4)
|
%
|
|
|
|
71.2
|
%
|
|
1st Quarter
2020
|
|
69.8
|
%
|
|
|
|
(0.7)
|
%
|
|
|
|
70.5
|
%
|
|
Quarterly and annual claim ratios and the trends they display,
may not be particularly meaningful indicators of future outcomes
for ORI's liability-oriented mix of business and its relatively
long claim payment patterns. Management's long-term targets are for
annually reported claim ratio averages in the high 60% to low 70%
range, and assuming the current mix of coverages, overall expense
ratio averages of 25% or below, resulting in a composite ratio
ranging between 90% and 95%.
|
Title Insurance
Segment Results
|
|
|
Title
Insurance
|
|
Summary
Operating Results
|
|
Quarters Ended March
31,
|
|
2020
|
|
2019
|
|
% Change
|
Net premiums and fees
earned
|
$
|
628.1
|
|
|
$
|
506.9
|
|
|
23.9
|
%
|
Net investment
income
|
10.8
|
|
|
10.2
|
|
|
5.2
|
|
Other
income
|
0.1
|
|
|
0.1
|
|
|
15.2
|
|
Operating
revenues
|
639.1
|
|
|
517.3
|
|
|
23.5
|
|
Claim
costs
|
21.5
|
|
|
14.4
|
|
|
49.0
|
|
Sales and general
expenses
|
573.3
|
|
|
480.9
|
|
|
19.2
|
|
Interest and other
charges
|
0.8
|
|
|
1.3
|
|
|
-36.1
|
|
Operating
expenses
|
595.8
|
|
|
496.7
|
|
|
19.9
|
|
Segment pretax
operating income (loss)
|
$
|
43.3
|
|
|
$
|
20.5
|
|
|
110.6
|
%
|
|
|
|
|
|
|
Claim
ratio
|
3.4
|
%
|
|
2.9
|
%
|
|
|
Expense
ratio
|
91.3
|
|
|
94.8
|
|
|
|
Composite
ratio
|
94.7
|
%
|
|
97.7
|
%
|
|
|
The Title segment's operating revenues were up nearly 24% in the
first quarter. Year-over-year comparisons of revenues from title
premiums and fees reflect the continuation of a low interest rate
environment resulting in a favorable real estate market through the
first quarter of 2020 coupled with a stable market share
position.
Claim costs trended higher as favorable development of prior
years' claim reserve estimates edged lower. The following table
shows recent annual and interim periods' claim ratios and the
effects of claim development trends:
|
|
|
|
|
Effect of Prior
Periods'
|
|
|
|
|
|
|
|
|
|
(Favorable)/
|
|
Claim Ratio
Excluding
|
|
Reported
|
|
Unfavorable
Claim
|
|
Prior Periods'
Claim
|
|
Claim
Ratio
|
|
Reserves
Development
|
|
Reserves
Development
|
2015
|
|
4.9
|
%
|
|
|
|
(0.6)
|
%
|
|
|
|
5.5
|
%
|
|
2016
|
|
3.8
|
|
|
|
|
(1.1)
|
|
|
|
|
4.9
|
|
|
2017
|
|
0.9
|
|
|
|
|
(3.3)
|
|
|
|
|
4.2
|
|
|
2018
|
|
2.1
|
|
|
|
|
(2.0)
|
|
|
|
|
4.1
|
|
|
2019
|
|
2.7
|
%
|
|
|
|
(1.3)
|
%
|
|
|
|
4.0
|
%
|
|
1st Quarter
2019
|
|
2.9
|
%
|
|
|
|
(1.1)
|
%
|
|
|
|
4.0
|
%
|
|
1st Quarter
2020
|
|
3.4
|
%
|
|
|
|
(0.5)
|
%
|
|
|
|
3.9
|
%
|
|
Net investment income increased by 5.2% for the quarter
reflecting a moderately growing invested asset base and a
relatively flat investment yield. Underwriting expenses grew at a
relatively slower rate than premium and fee revenues resulting in
the 3.5 percentage point decline in the expense ratio. In
combination, these factors produced significantly greater pretax
operating income for 2020's first quarter.
|
RFIG Run-off
Segment Results
|
|
|
RFIG
Run-off
|
|
Summary Operating
Results (a)
|
|
Quarters Ended March
31,
|
|
2020
|
|
2019
|
|
% Change
|
A. Mortgage
Insurance (MI)
|
|
|
|
|
|
Net premiums
earned
|
$
|
12.6
|
|
|
$
|
16.0
|
|
|
-21.2
|
%
|
Net investment
income
|
4.3
|
|
|
4.3
|
|
|
0.9
|
|
Claim
costs
|
4.7
|
|
|
9.5
|
|
|
-50.1
|
|
MI pretax operating
income (loss)
|
$
|
8.4
|
|
|
$
|
7.0
|
|
|
19.5
|
%
|
|
|
|
|
|
|
Claim
ratio
|
37.8
|
%
|
|
59.7
|
%
|
|
|
Expense
ratio
|
30.2
|
|
|
23.4
|
|
|
|
Composite
ratio
|
68.0
|
%
|
|
83.1
|
%
|
|
|
|
|
|
|
|
|
B. Consumer Credit
Indemnity (CCI) (a)
|
|
|
|
|
|
CCI pretax operating
income (loss)
|
$
|
—
|
|
|
$
|
1.2
|
|
|
|
|
|
|
|
|
|
C. Total MI and
CCI Run-off business (a)
|
|
|
|
|
|
Segment pretax
operating income (loss)
|
$
|
8.4
|
|
|
$
|
8.2
|
|
|
1.6
|
%
|
|
|
|
|
|
|
__________________
|
(a)
|
RFIG segment
pretax operating income (loss) includes amounts attributable to the
Company's consumer credit indemnity run-off business of $ - and
$1.2 for the first quarters of 2020 and 2019, respectively. Results
for the CCI coverages are expected to be immaterial in the
remaining run-off periods. Effective July 1, 2019, these results
have been re-classified to the General Insurance Segment for all
future periods.
|
Pretax operating results of the run-off MI business reflect the
expected, continuing drop in net earned premiums from declining
risk in force. Investment income remained level resulting from a
smaller invested asset base offset by a slightly improved
yield.
As indicated in the far right column of the following table, MI
claim ratios have continued to decline fairly consistently,
favorable developments of prior periods' reserves notwithstanding.
The downtrend is largely due to a combination of declining new loan
defaults, and stable-to-improving cure rates for outstanding
delinquent loans.
|
|
|
|
|
Effect of Prior
Periods'
|
|
|
|
|
|
|
|
|
|
(Favorable)/
|
|
Claim Ratio
Excluding
|
|
Reported
|
|
Unfavorable
Claim
|
|
Prior Periods'
Claim
|
|
Claim
Ratio
|
|
Reserves
Development
|
|
Reserves
Development
|
2015
|
|
56.4
|
%
|
|
|
|
(65.0)
|
%
|
|
|
|
121.4
|
%
|
|
2016
|
|
34.1
|
|
|
|
|
(39.8)
|
|
|
|
|
73.9
|
|
|
2017
|
|
57.6
|
|
|
|
|
(38.3)
|
|
|
|
|
95.9
|
|
|
2018
|
|
43.2
|
|
|
|
|
(27.0)
|
|
|
|
|
70.2
|
|
|
2019
|
|
55.0
|
%
|
|
|
|
(12.5)
|
%
|
|
|
|
67.5
|
%
|
|
1st Quarter
2019
|
|
59.7
|
%
|
|
|
|
(10.0)
|
%
|
|
|
|
69.7
|
%
|
|
1st Quarter
2020
|
|
37.8
|
%
|
|
|
|
(14.6)
|
%
|
|
|
|
52.4
|
%
|
|
|
Corporate
and Other Operating Results
|
|
|
Corporate and
Other
|
|
Summary Operating
Results
|
|
Quarters Ended March
31,
|
|
2020
|
|
2019
|
|
% Change
|
Net life and accident
premiums earned
|
$
|
3.1
|
|
|
$
|
3.4
|
|
|
-9.0
|
%
|
Net investment
income
|
8.3
|
|
|
9.0
|
|
|
-7.4
|
|
Other operating
income
|
—
|
|
|
—
|
|
|
—
|
|
Operating
revenues
|
11.5
|
|
|
12.4
|
|
|
-7.8
|
|
Claim
costs
|
0.8
|
|
|
2.7
|
|
|
-67.5
|
|
Insurance
expenses
|
1.2
|
|
|
1.2
|
|
|
-0.5
|
|
Corporate, interest
and other expenses - net
|
(2.9)
|
|
|
(4.7)
|
|
|
38.0
|
|
Operating
expenses
|
(0.8)
|
|
|
(0.7)
|
|
|
-2.4
|
|
Corporate and other
pretax operating income (loss)
|
$
|
12.3
|
|
|
$
|
13.2
|
|
|
-7.2
|
%
|
This segment includes the combination of a small life and
accident insurance business and the net costs associated with the
parent holding company and its internal corporate services
subsidiaries. The segment tends to produce highly variable results
stemming from volatility inherent to the small scale of the life
and accident insurance line, net investment income, and net
interest charges (credits) pertaining to external and intra-system
financing arrangements.
|
Summary
Consolidated Balance Sheet
|
|
|
March 31,
|
|
December
31,
|
|
March 31,
|
|
2020
|
|
2019
|
|
2019
|
Assets:
|
|
|
|
|
|
Cash and fixed
maturity securities
|
$
|
10,149.7
|
|
|
$
|
10,381.5
|
|
|
$
|
9,926.2
|
|
Equity
securities
|
3,214.9
|
|
|
4,030.5
|
|
|
3,738.9
|
|
Other invested
assets
|
114.7
|
|
|
115.4
|
|
|
128.7
|
|
Cash and invested
assets
|
13,479.4
|
|
|
14,527.4
|
|
|
13,793.9
|
|
Accounts and premiums
receivable
|
1,590.3
|
|
|
1,466.7
|
|
|
1,585.0
|
|
Federal income tax
recoverable: Current
|
—
|
|
|
5.7
|
|
|
—
|
|
Deferred
|
130.1
|
|
|
—
|
|
|
—
|
|
Prepaid federal
income taxes
|
—
|
|
|
—
|
|
|
129.8
|
|
Reinsurance balances
recoverable
|
3,884.1
|
|
|
3,823.9
|
|
|
3,556.1
|
|
Deferred policy
acquisition costs
|
323.3
|
|
|
325.4
|
|
|
319.5
|
|
Sundry
assets
|
944.8
|
|
|
927.0
|
|
|
912.3
|
|
Total
assets
|
$
|
20,352.2
|
|
|
$
|
21,076.3
|
|
|
$
|
20,296.9
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity:
|
|
|
|
|
|
Policy
liabilities
|
$
|
2,479.9
|
|
|
$
|
2,419.2
|
|
|
$
|
2,377.1
|
|
Claim
reserves
|
9,995.9
|
|
|
9,929.5
|
|
|
9,488.4
|
|
Federal income tax
payable: Current
|
27.9
|
|
|
—
|
|
|
22.4
|
|
Deferred
|
—
|
|
|
112.2
|
|
|
108.8
|
|
Reinsurance balances
and funds
|
727.9
|
|
|
616.0
|
|
|
670.6
|
|
Debt
|
967.8
|
|
|
974.0
|
|
|
975.1
|
|
Sundry
liabilities
|
1,009.7
|
|
|
1,025.1
|
|
|
988.5
|
|
Total
liabilities
|
15,209.3
|
|
|
15,076.1
|
|
|
14,631.3
|
|
Shareholders'
equity
|
5,142.9
|
|
|
6,000.1
|
|
|
5,665.6
|
|
Total liabilities and
shareholders' equity
|
$
|
20,352.2
|
|
|
$
|
21,076.3
|
|
|
$
|
20,296.9
|
|
|
Cash, Invested
Assets, and Shareholders' Equity
|
|
|
|
Cash, Invested
Assets, and Shareholders' Equity
|
|
|
|
|
|
|
|
|
% Change
|
|
|
March 31,
|
|
Dec. 31,
|
|
March 31,
|
|
March '20/
|
|
March '20/
|
|
|
2020
|
|
2019
|
|
2019
|
|
Dec. '19
|
|
March '19
|
Cash and invested
assets:
|
|
|
|
|
|
|
|
|
|
|
Available for sale
fixed maturity securities, cash
|
|
|
|
|
|
|
|
|
|
|
and
other invested assets, carried at fair value
|
$
|
9,248.7
|
|
|
$
|
9,475.2
|
|
|
$
|
9,015.9
|
|
|
-2.4
|
%
|
|
2.6
|
%
|
|
Equity securities,
carried at fair value
|
3,214.9
|
|
|
4,030.5
|
|
|
3,738.9
|
|
|
-20.2
|
|
|
-14.0
|
|
|
Held to maturity
securities, carried at amortized cost
|
1,015.8
|
|
|
1,021.7
|
|
|
1,039.0
|
|
|
-0.6
|
|
|
-2.2
|
|
|
Total per balance
sheet
|
$
|
13,479.4
|
|
|
$
|
14,527.4
|
|
|
$
|
13,793.9
|
|
|
-7.2
|
%
|
|
-2.3
|
%
|
|
Total at cost for
all
|
$
|
13,415.6
|
|
|
$
|
13,327.2
|
|
|
$
|
13,026.1
|
|
|
0.7
|
%
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
shareholders' equity per share:
|
|
|
|
|
|
|
|
|
|
|
Equity before items
below
|
$
|
17.58
|
|
|
$
|
17.25
|
|
|
$
|
17.35
|
|
|
1.9
|
%
|
|
1.3
|
%
|
|
Unrealized investment
gains (losses) and other
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
comprehensive income (loss)
|
(0.29)
|
|
|
2.73
|
|
|
1.59
|
|
|
|
|
|
|
|
|
Total
|
$
|
17.29
|
|
|
$
|
19.98
|
|
|
$
|
18.94
|
|
|
-13.5
|
%
|
|
-8.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmented
composition of
|
|
|
|
|
|
|
|
|
|
shareholders' equity per
share:
|
|
|
|
|
|
|
|
|
|
|
Excluding RFIG
run-off segment
|
$
|
15.89
|
|
|
$
|
18.37
|
|
|
$
|
17.37
|
|
|
-13.5
|
%
|
|
-8.5
|
%
|
|
RFIG run-off
segment
|
1.40
|
|
|
1.61
|
|
|
1.57
|
|
|
|
|
|
|
|
|
Consolidated
total
|
$
|
17.29
|
|
|
$
|
19.98
|
|
|
$
|
18.94
|
|
|
-13.5
|
%
|
|
-8.7
|
%
|
Old Republic's invested assets portfolio is directed in
consideration of enterprise-wide risk management objectives. Most
importantly, these are intended to ensure solid funding of the
insurance subsidiaries' long-term obligations to policyholders and
other beneficiaries, as well as the long-term stability of the
subsidiaries' capital accounts. To this end, the investment
portfolio contains no significant insurance risk-correlated asset
exposures to real estate, mortgage-backed securities,
collateralized debt obligations ("CDO's"), derivatives, hybrid
securities, or illiquid private equity and hedge fund investments.
Moreover, the Company does not engage in hedging or securities
lending transactions, nor does it invest in securities whose values
are predicated on non-regulated financial instruments exhibiting
amorphous or unfunded counter-party risk attributes.
As of March 31, 2020, the
consolidated investment portfolio reflected an allocation of
approximately 76% to fixed-maturity (bonds and notes) and
short-term investments, and 24% to equity securities (common
stock). The fixed-maturity security portfolio continues to be the
basic anchor for the insurance underwriting subsidiaries'
obligations. The maturities are stratified and conservatively
matched to the expected timing of future years' payments of those
obligations. The asset quality has remained at high levels.
Most of ORI's investable funds have been directed toward
purchasing high-quality common shares of U.S. companies (currently
limited to fewer than 100 issues). We favor those with long-term
records of reasonable earnings growth and steadily increasing
dividends. This has been the major reason why dividends from equity
securities have been the source of investment income growth in
recent years. Periodic stress tests of this portfolio are made
pursuant to enterprise risk management guidelines and controls.
Their purpose is to gain reasonable assurance that periodic
downdrafts in market prices would not seriously undermine ORI's
financial strength and the long-term continuity and prospects of
the business.
Changes in shareholders' equity per share are reflected in the
following table. As shown, these resulted mostly from net income
excluding net investment gains (losses), realized and unrealized
investment gains (losses), and dividend payments to
shareholders.
|
|
Shareholders'
Equity
|
|
|
Per
Share
|
|
|
March 31,
|
|
|
2020
|
|
2019
|
Beginning
balance
|
|
$
|
19.98
|
|
|
$
|
17.23
|
|
Changes in
shareholders' equity:
|
|
|
|
|
Net income (loss)
excluding net investment gains (losses)
|
|
0.47
|
|
|
0.41
|
|
Net of tax realized
investment gains (losses)
|
|
0.05
|
|
|
0.03
|
|
Net of tax unrealized
investment gains (losses) on
|
|
|
|
|
securities
carried at fair value
|
|
(2.99)
|
|
|
1.40
|
|
Total net of tax
realized and unrealized
|
|
|
|
|
investment gains
(losses)
|
|
(2.94)
|
|
|
1.43
|
|
Cash
dividends
|
|
(0.21)
|
|
|
(0.20)
|
|
Other
|
|
(0.01)
|
|
|
0.07
|
|
Net change
|
|
(2.69)
|
|
|
1.71
|
|
Ending
balance
|
|
$
|
17.29
|
|
|
$
|
18.94
|
|
Percentage change for
the period
|
|
-13.5
|
%
|
|
9.9
|
%
|
|
Capitalization
|
|
|
Capitalization
|
|
March 31,
|
|
December
31,
|
|
March 31,
|
|
2020
|
|
2019
|
|
2019
|
Debt:
|
|
|
|
|
|
4.875% Senior Notes
due 2024
|
$
|
397.5
|
|
|
$
|
397.3
|
|
|
$
|
396.9
|
|
3.875% Senior Notes
due 2026
|
546.4
|
|
|
546.2
|
|
|
545.8
|
|
Other miscellaneous
debt
|
23.9
|
|
|
30.4
|
|
|
32.3
|
|
Total debt
|
967.8
|
|
|
974.0
|
|
|
975.1
|
|
Common shareholders'
equity
|
5,142.9
|
|
|
6,000.1
|
|
|
5,665.6
|
|
Total
capitalization
|
$
|
6,110.7
|
|
|
$
|
6,974.2
|
|
|
$
|
6,640.8
|
|
|
|
|
|
|
|
Capitalization
ratios:
|
|
|
|
|
|
Debt
|
15.8
|
%
|
|
14.0
|
%
|
|
14.7
|
%
|
Common shareholders'
equity
|
84.2
|
|
|
86.0
|
|
|
85.3
|
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Total capitalization has declined as of March 31, 2020 primarily due to the net loss
caused by the unrealized loss from changes in the fair value of
equity securities and corresponding reduction in the shareholders'
equity account.
|
Managing Old
Republic's Insurance Business for the Long-Run
|
The insurance business is distinguished from most others in that
the prices (premiums) charged for various insurance products are
set without certainty of the ultimate benefit and claim costs that
will emerge, often many years after issuance and expiration of a
policy. This basic fact casts Old Republic as a risk-taking
enterprise managed for the long run. Old Republic therefore
conducts the business with a primary focus on achieving favorable
underwriting results over cycles, and on the maintenance of
financial soundness in support of the insurance subsidiaries'
long-term obligations to policyholders and their beneficiaries.
In this light, the Company's affairs are managed for the long
run and without significant regard to quarterly or even annual
reporting periods that American industry must observe. In Old
Republic's view, such short reporting time frames do not comport
well with the long-term nature of much of its business. Management
therefore believes that the Company's operating results and
financial condition can best be evaluated by observing underwriting
and overall operating performance trends over succeeding five- or
preferably ten-year intervals. A ten-year period in particular can
likely encompass at least one economic and/or underwriting cycle
and thereby provide an appropriate time frame for such cycle to run
its course, and for premium rate changes and reserved claim costs
to be quantified and merge in financial results with greater
finality and effect.
Accompanying Financial Data and Other Information:
- About Old Republic
- Conference Call Information
- Safe Harbor Statement
Financial Supplement:
- A financial supplement to this news release is available on the
Company's website: www.oldrepublic.com
About Old Republic
Chicago-based Old Republic
International Corporation is one of the nation's 50 largest
shareholder-owned insurance businesses. It is a member of the
Fortune 500 listing of America's largest companies.
The Company is organized as an insurance holding company whose
subsidiaries actively market, underwrite, and provide risk
management services for a wide variety of coverages mostly in the
general and title insurance fields. A long-term interest in
mortgage guaranty and consumer credit indemnity coverages has
devolved to a run-off operating mode in recent years. Old
Republic's general insurance business ranks among the nation's 50
largest, while its title insurance operations are the third largest
in its industry.
The nature of Old Republic's business requires that it
be managed for the long run, and its cash dividend policy reflects
this long-term orientation. The current annualized dividend rate
of $0.84 per share marks the 39th consecutive year
that Old Republic has boosted this rate, and 2020 becomes
the 79th year of uninterrupted regular cash dividend payments.
Here's a summary of recent years' total book and market returns,
which includes the addition and reinvestment of cash dividend
payments, in comparison with the financial performance of three
selected indices similarly developed.
|
ORI
|
Selected Indices'
Compounded
|
|
Annual
|
Annual
|
Total Annual
Returns
|
|
Book Value
|
Market
Value
|
Nominal
|
|
|
|
Compounded
|
Compounded
|
Gross
|
S & P
|
S & P
|
|
Total
|
Total
|
Domestic
|
500
|
Insurance
|
|
Return
|
Return
|
Product
|
Index
|
Index
|
Ten Years 2000 -
2009
|
9.5
|
%
|
7.4
|
%
|
4.1
|
%
|
-1.0
|
%
|
-3.7
|
%
|
Ten Years 2010 -
2019
|
7.7
|
%
|
14.8
|
%
|
4.0
|
%
|
13.6
|
%
|
12.4
|
%
|
Twenty Years 2000 -
2019
|
8.6
|
%
|
11.0
|
%
|
4.1
|
%
|
6.1
|
%
|
4.1
|
%
|
According to the most recent edition of Mergent's
Dividend Achievers, Old Republic is listed in 62nd
place among just 111 qualifying publicly held companies, out of
thousands considered, that have posted at least 25 consecutive
years of annual dividend growth.
Conference Call Information
Old Republic has scheduled a conference call at 3:00 p.m. ET (2:00 p.m.
CT) today, to discuss its first quarter 2020 performance and
to review major operating trends and business developments. To
access this call live in listen-only mode:
Log on to the Company's website
at www.oldrepublic.com 15 minutes before the call to
download the necessary software, or, alternatively
the call can also be accessed
by phone at 888-481-2862.
Interested parties may also listen to a replay of the call
through April 30, 2020 by dialing
844-512-2921, passcode 1862762, or by accessing it on Old Republic
International's website through May 23,
2020.
Safe Harbor Statement
Historical data pertaining to the operating results, liquidity,
and other performance indicators applicable to an insurance
enterprise such as Old Republic are not necessarily indicative of
results to be achieved in succeeding years. In addition to the
factors cited below, the long-term nature of the insurance
business, seasonal and annual patterns in premium production and
incidence of claims, changes in yields obtained on invested assets,
changes in government policies and free markets affecting inflation
rates and general economic conditions, and changes in legal
precedents or the application of law affecting the settlement of
disputed and other claims can have a bearing on period-to-period
comparisons and future operating results. Furthermore, due to the
financial market and economic disruptions caused by the COVID-19
pandemic and the associated governmental responses, it is therefore
possible that Old Republic's operating results, business and
financial condition could be adversely affected in subsequent
periods depending on the length and severity of these
disruptions.
Some of the oral or written statements made in the Company's
reports, press releases, and conference calls following earnings
releases, can constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Of
necessity, any such forward-looking statements involve assumptions,
uncertainties, and risks that may affect the Company's future
performance. With regard to Old Republic's General Insurance
segment, its results can be particularly affected by the level of
market competition, which is typically a function of available
capital and expected returns on such capital among competitors, the
levels of investment yields and inflation rates, and periodic
changes in claim frequency and severity patterns caused by natural
disasters, weather conditions, accidents, illnesses, work-related
injuries, and unanticipated external events. Title Insurance and
RFIG Run-off results can be affected by similar factors, and by
changes in national and regional housing demand and values, the
availability and cost of mortgage loans, employment trends, and
default rates on mortgage loans. Life and accident insurance
earnings can be affected by the levels of employment and consumer
spending, changes in mortality and health trends, and alterations
in policy lapsation rates. At the parent holding company level,
operating earnings or losses are generally reflective of the amount
of debt outstanding and its cost, interest income on temporary
holdings of short-term investments, and period-to-period variations
in the costs of administering the Company's widespread
operations.
The General Insurance, Title Insurance, Corporate and Other
Segments, and the RFIG Run-off business maintain customer
information and rely upon technology platforms to conduct their
business. As a result, each of them and the Company are exposed to
cyber risk. Many of the Company's operating subsidiaries maintain
separate IT systems which are deemed to reduce enterprise-wide
risks of potential cybersecurity incidents. However, given the
potential magnitude of a significant breach, the Company
continually evaluates on an enterprise-wide basis its IT hardware,
security infrastructure and business practices to respond to these
risks and to detect and remediate in a timely manner significant
cybersecurity incidents or business process interruptions.
A more detailed listing and discussion of the risks and other
factors which affect the Company's risk-taking insurance business
are included in Part I, Item 1A - Risk Factors, of the Company's
2019 Form 10-K Annual Report filing to the Securities and Exchange
Commission, which is specifically incorporated herein by
reference.
Any forward-looking statements or commentaries speak only as of
their dates. Old Republic undertakes no obligation to publicly
update or revise any and all such comments, whether as a result of
new information, future events or otherwise, and accordingly they
may not be unduly relied upon.
For Old Republic's
latest news releases and other corporate documents:
Please visit us at
www.oldrepublic.com
|
|
|
|
|
Alternatively,
please write or call:
Investor
Relations
Old Republic
International Corporation
307 North Michigan
Avenue Chicago, IL 60601
312-346-8100
|
|
Further
Information Contacts:
|
AT OLD
REPUBLIC:
|
AT FINANCIAL
RELATIONS BOARD:
|
Craig R. Smiddy:
President and CEO
|
Analysts/Investors:
Marilynn Meek
|
(312)
346-8100
|
(212)
827-3773
|
View original
content:http://www.prnewswire.com/news-releases/old-republic-reports-results-for-the-first-quarter-2020-301046126.html
SOURCE Old Republic International Corporation