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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly report pursuant to section 13 or 15(d) of the Security Exchange Act of 1934
for the quarterly period ended: September 30, 2022
or
Transition report pursuant to section 13 or 15(d) of the Security Exchange Act of 1934
Commission File Number: 001-10607
OLD REPUBLIC INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2678171
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
307 North Michigan Avenue Chicago Illinois 60601
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code: 312-346-8100

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock / $1 par value ORI New York Stock Exchange

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 whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: No:

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).Yes: ☐  No:

The number of shares of the Registrant's Common Stock outstanding at September 30, 2022 was 304,303,660.

There are 44 pages in this report



OLD REPUBLIC INTERNATIONAL CORPORATION
Report on Form 10-Q / September 30, 2022
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 5
CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND COMMON
SHAREHOLDERS' EQUITY 6
CONSOLIDATED STATEMENTS OF CASH FLOWS 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   8 - 17
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS 18 - 40
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 41
CONTROLS AND PROCEDURES 41
PART II OTHER INFORMATION:
ITEM 1 - LEGAL PROCEEDINGS 42
ITEM 1A - RISK FACTORS 42
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 42
ITEM 6 - EXHIBITS 42
SIGNATURE 43
EXHIBIT INDEX 44




2


Old Republic International Corporation and Subsidiaries
Consolidated Balance Sheets
($ in Millions, Except Share Data)
(Unaudited)
September 30, December 31,
2022 2021
Assets
Investments:
Available for sale:
Fixed income securities (at fair value) (amortized cost: $11,606.7 and $10,438.6) $ 10,841.8  $ 10,675.7 
Short-term investments (at fair value which approximates cost) 1,371.5  565.7 
Total 12,213.3  11,241.4 
Equity securities (at fair value) (cost: $2,151.0 and $3,766.5) 3,045.4  5,302.8 
Other investments 30.3  32.0 
Total Investments 15,289.1  16,576.3 
Other Assets:
Cash 102.4  158.1 
Accrued investment income 100.2  84.4 
Accounts and notes receivable 2,096.9  1,768.7 
Federal income tax recoverable: Current   11.8 
 Deferred 127.4  — 
Reinsurance balances and funds held 330.0  258.1 
Reinsurance recoverable: Paid losses 136.8  118.2 
 Policy and loss reserves 5,542.8  4,825.1 
Deferred policy acquisition costs 386.7  350.4 
Sundry assets 834.2  830.3 
Total Other Assets 9,657.9  8,405.5 
Total Assets $ 24,947.0  $ 24,981.8 
Liabilities, Preferred Stock, and Common Shareholders' Equity
Liabilities:
Loss and loss adjustment expense reserves $ 12,174.7  $ 11,425.5 
Unearned premiums 2,993.1  2,559.4 
Other policyholders' benefits and funds 189.5  192.6 
Total policy liabilities and accruals 15,357.3  14,177.5 
Commissions, expenses, fees, and taxes 557.7  573.5 
Reinsurance balances and funds 1,154.3  866.0 
Federal income tax payable: Current 2.0  — 
                                              Deferred   249.5 
Debt 1,596.6  1,588.5 
Sundry liabilities 600.7  633.3 
Total Liabilities 19,268.9  18,088.6 
Preferred Stock (1)
  — 
Common Shareholders' Equity:
Common stock (1) 304.3  307.5 
Additional paid-in capital 1,299.7  1,376.1 
Retained earnings 4,874.9  5,214.0 
Accumulated other comprehensive income (loss) (728.0) 78.0 
Unallocated ESSOP shares (at cost) (72.7) (82.5)
Total Common Shareholders' Equity 5,678.1  6,893.2 
Total Liabilities, Preferred Stock and Common Shareholders' Equity $ 24,947.0  $ 24,981.8 

________

(1)    At September 30, 2022 and December 31, 2021, there were 75,000,000 shares of $0.01 par value preferred stock authorized, of which no shares were outstanding. As of the same dates, there were 500,000,000 shares of common stock, $1.00 par value, authorized, of which 304,303,660 and 307,565,632 were issued as of September 30, 2022 and December 31, 2021, respectively. At September 30, 2022 and December 31, 2021, there were 100,000,000 shares of Class B Common Stock, $1.00 par value, authorized, of which no shares were issued.
See accompanying Notes to Consolidated Financial Statements.

3


Old Republic International Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
($ in Millions, Except Share Data)
Quarters Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenues:
Net premiums earned $ 1,862.3  $ 1,941.7  $ 5,578.5  $ 5,542.5 
Title, escrow, and other fees 80.9  113.6  266.1  339.1 
Total premiums and fees 1,943.3  2,055.4  5,844.6  5,881.6 
Net investment income 115.1  111.6  329.2  323.6 
Other income 39.7  37.8  113.7  112.0 
Total operating revenues 2,098.2  2,204.9  6,287.7  6,317.3 
Net investment gains (losses):
Realized from actual transactions and impairments (26.2) 6.6  92.3  15.6 
Unrealized from changes in fair value of
equity securities (350.8) (199.3) (641.8) 288.1 
Total realized and unrealized investment
gains (losses) (377.1) (192.6) (549.5) 303.7 
Total revenues 1,721.0  2,012.2  5,738.1  6,621.0 
Expenses:
Loss and loss adjustment expenses 624.3  615.4  1,864.4  1,829.3 
Dividends to policyholders 4.2  2.9  10.8  17.5 
Underwriting, acquisition, and other expenses 1,195.8  1,270.8  3,604.5  3,601.8 
Interest and other charges 16.3  16.8  49.9  39.7 
Total expenses 1,840.7  1,906.2  5,529.7  5,488.4 
Income (loss) before income taxes (credits) (119.6) 106.0  208.3  1,132.6 
Income Taxes (Credits):
Current 79.5  63.0  202.8  160.4 
Deferred (107.3) (45.7) (168.7) 64.8 
Total (27.8) 17.2  34.0  225.2 
Net Income (Loss) $ (91.7) $ 88.7  $ 174.3  $ 907.3 
Net Income (Loss) Per Share:
Basic $ (.31) $ .29  $ .57  $ 3.01 
Diluted $ (.31) $ .29  $ .57  $ 3.00 
Average shares outstanding: Basic 303,652,802 301,577,493 303,797,001 301,247,397
Diluted 303,652,802 303,539,358 305,381,348 302,908,488

See accompanying Notes to Consolidated Financial Statements.

4


Old Republic International Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
($ in Millions)
Quarters Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Net Income (Loss) As Reported $ (91.7) $ 88.7  $ 174.3  $ 907.3 
Other comprehensive income (loss):
Unrealized gains (losses) on securities not included
in the statements of income:
Unrealized gains (losses) before reclassifications,
not included in the statements of income (387.5) (67.9) (1,277.0) (248.9)
Amounts reclassified as realized investment (gains)
losses in the statements of income 207.2  (.8) 267.6  (1.9)
Pretax unrealized gains (losses) on securities not
included in the statements of income (180.3) (68.8) (1,009.3) (250.9)
Deferred income taxes (credits) (37.9) (14.5) (212.9) (52.9)
Net unrealized gains (losses) on securities not included
in the statements of income, net of tax (142.3) (54.3) (796.3) (197.9)
Defined benefit pension plans:
Net pension adjustment before reclassifications   —    — 
Amounts reclassified as underwriting, acquisition,
and other expenses in the statements of income .7  1.8  2.3  5.5 
Pretax net adjustment related to defined benefit
pension plans .7  1.8  2.3  5.5 
Deferred income taxes (credits) .1  .3  .4  1.1 
Net adjustment related to defined benefit pension
plans, net of tax .6  1.4  1.8  4.3 
Foreign currency translation adjustment (10.2) (4.3) (11.5) 2.7 
Total other comprehensive income (loss) (151.9) (57.2) (806.1) (190.8)
Comprehensive Income (Loss) $ (243.7) $ 31.5  $ (631.7) $ 716.4 


See accompanying Notes to Consolidated Financial Statements.

5


Old Republic International Corporation and Subsidiaries
Consolidated Statements of Preferred Stock
and Common Shareholders' Equity (Unaudited)
($ in Millions)
Quarters Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Preferred Stock:
Balance, beginning and end of period $   $ —  $   $ — 
Common Stock:
Balance, beginning of period $ 308.9  $ 305.7  $ 307.5  $ 304.1 
Dividend reinvestment plan   —    — 
Stock based compensation .1  1.2  1.5  2.7 
Treasury stock restored to unissued status (4.8) —  (4.8) — 
Balance, end of period $ 304.3  $ 307.0  $ 304.3  $ 307.0 
Additional Paid-in Capital:
Balance, beginning of period $ 1,395.9  $ 1,337.6  $ 1,376.1  $ 1,306.9 
Dividend reinvestment plan 1.3  .2  1.8  1.7 
Stock based compensation 5.6  21.6  22.0  48.7 
ESSOP shares released 1.8  4.1  4.8  6.3 
Treasury stock restored to unissued status (99.9) —  (99.9) — 
Other - net (5.0) —  (5.1) — 
Balance, end of period $ 1,299.7  $ 1,363.8  $ 1,299.7  $ 1,363.8 
Retained Earnings:
Balance, beginning of period $ 5,341.0  $ 5,082.1  $ 5,214.0  $ 4,394.8 
Net income (loss) (91.7) 88.7  174.3  907.3 
Dividends on common shares (1) (374.3) (517.5) (513.4) (648.8)
Balance, end of period $ 4,874.9  $ 4,653.3  $ 4,874.9  $ 4,653.3 
Accumulated Other Comprehensive Income (Loss):
Balance, beginning of period $ (576.0) $ 150.4  $ 78.0  $ 284.0 
Net unrealized gains (losses) on securities not included in the
statements of income, net of tax (142.3) (54.3) (796.3) (197.9)
Net adjustment related to defined benefit pension plans,
net of tax .6  1.4  1.8  4.3 
Foreign currency translation adjustment (10.2) (4.3) (11.5) 2.7 
Balance, end of period $ (728.0) $ 93.2  $ (728.0) $ 93.2 
Unallocated ESSOP Shares:
Balance, beginning of period $ (76.6) $ (97.3) $ (82.5) $ (103.2)
ESSOP shares released 3.8  9.3  9.8  15.2 
Balance, end of period $ (72.7) $ (87.9) $ (72.7) $ (87.9)
Treasury Stock:
Balance, beginning of period $   $ —  $   $ — 
Acquired during the period (104.8) —  (104.8) — 
Restored to unissued status 104.8  —  104.8  — 
Balance, end of period $   $ —  $   $ — 
________

(1)    Cash dividends per common share of $1.23 and $1.72 were declared for the quarters ended September 30, 2022 and 2021, respectively, and $1.69 and $2.16 were declared for the comparative nine month periods.
See accompanying Notes to Consolidated Financial Statements.

6


Old Republic International Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
($ in Millions)
Nine Months Ended
September 30,
2022 2021
Cash flows from operating activities:
Net income (loss) $ 174.3  $ 907.3 
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Deferred policy acquisition costs (36.2) (27.2)
Premiums and other receivables (328.1) (267.5)
Loss and loss adjustment expense reserves 265.0  257.5 
Unearned premiums and other policyholders' liabilities 197.0  112.0 
Income taxes (150.6) 63.0 
Reinsurance balances and funds 197.6  179.8 
Realized investment (gains) losses from actual transactions (92.3) (15.6)
Unrealized investment (gains) losses from changes in fair value
of equity securities 641.8  (288.1)
Accounts payable, accrued expenses and other 34.7  49.4 
Total 903.4  970.6 
Cash flows from investing activities:
Fixed income securities:
Maturities and early calls 1,128.6  1,121.4 
Sales 810.6  281.0 
Sales of:
Equity securities 2,011.5  522.6 
Other investments 7.4  6.5 
Purchases of:
Fixed income securities (3,417.2) (1,668.4)
Equity securities (37.7) (993.5)
Other investments (39.4) (42.0)
Net decrease (increase) in short-term investments (806.3) (352.2)
Other - net (12.3) — 
Total (354.7) (1,124.5)
Cash flows from financing activities:
Issuance of debentures and notes   642.5 
Issuance of common shares 19.0  50.3 
Redemption of debentures and notes   (21.7)
Dividends on common shares (including a special dividend of $308.4 paid in
September 2022 and $304.0 paid in January 2021) (512.5) (501.5)
Treasury stock acquired (104.8) — 
Other - net (5.9) (.8)
Total (604.3) 168.7 
Increase (decrease) in cash (55.7) 14.7 
Cash, beginning of period 158.1  118.7 
Cash, end of period $ 102.4  $ 133.4 
Supplemental cash flow information:
Cash paid (received) during the period for: Interest $ 53.3  $ 40.9 
                                                                         Income taxes $ 185.2  $ 162.4 
See accompanying Notes to Consolidated Financial Statements.

7


OLD REPUBLIC INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
($ in Millions, Except Share Data)

Note 1 - Summary of Significant Accounting Policies

Accounting Principles - The accompanying consolidated financial statements have been prepared in conformity with the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") of accounting principles generally accepted in the United States of America ("GAAP"). These interim financial statements should be read in conjunction with these notes and those included in the Company's 2021 Annual Report on Form 10-K incorporated herein by reference. The financial accounting and reporting process relies on estimates and on the exercise of judgment. In the opinion of management all adjustments consisting only of normal recurring accruals necessary for a fair presentation of interim periods' results and financial position have been recorded. Pertinent accounting and disclosure pronouncements issued from time to time by the FASB are adopted by the Company as they become effective.

Statement Presentation - Amounts shown in the consolidated financial statements and applicable notes are stated (except as otherwise indicated and as to share data) in millions, which amounts may not add to totals shown due to truncation. Reclassifications are made in prior periods' financial statements whenever appropriate to conform to the most current presentation.

Investments - The Company classifies its fixed income securities, also referred to as fixed maturity securities, as those it either (1) has the intent and ability to hold until maturity, (2) has available for sale or (3) has the intention of trading. The Company's entire fixed income portfolio is classified as available for sale.

Fixed income securities classified as available for sale are reported at fair value with changes in such values, net of deferred income taxes, reflected directly in shareholders' equity. Equity securities are reported at fair value with changes in such values reflected as unrealized investment gains (losses) in the consolidated statements of income. Fair values are based on quoted market prices or estimates using values obtained from recognized independent pricing services.

The status and fair value changes of each of the fixed income investments are reviewed at least once per quarter to assess whether a decline in fair value of an investment below its cost basis is the result of a credit loss. Credit losses are recorded through an allowance with the corresponding charge to realized investment gains (losses). If the Company intends to sell or is more likely than not required to sell a security, the asset is written down to fair value directly through realized investment gains (losses).

Investment income is reported net of allocated expenses and includes appropriate adjustments for amortization of premium and accretion of discount on fixed income securities acquired at other than par value. Dividends on equity securities are credited to income on the ex-dividend date. At September 30, 2022, the Company and its subsidiaries did not have significant amounts of non-income producing securities.

Investment gains and losses, which result from sales or write downs of securities, are reflected as revenues in the income statement and are determined on the basis of amortized cost at date of sale for fixed income securities, and cost in regard to equity securities; such bases apply to the specific securities sold.

Revenue Recognition - Pursuant to GAAP applicable to the insurance industry, revenues are recognized as follows:

Substantially all general insurance premiums pertain to annual policies and are reflected in income on a pro-rata basis in association with the related loss and loss adjustment expenses.

Title premium and fee revenues stemming from the Company's direct operations (which include branch offices of its title insurers and wholly owned agency subsidiaries) represent approximately 20% of 2022 consolidated title business revenues. Such premiums are generally recognized as income at the escrow closing date which approximates the policy effective date. Fee income related to escrow and other closing services is recognized when the related services have been performed and completed. The remaining title premium and fee revenues are produced by independent title agents. Rather than making estimates that could be subject to significant variance from actual premium and fee production, the Company recognizes revenues from those sources upon receipt. Such receipts can reflect a three to four month lag relative to the effective date of the underlying title policy, and are offset concurrently by production expenses and loss reserve provisions.

Loss and Loss Adjustment Expenses - The establishment of loss reserves by the Company's insurance subsidiaries is a reasonably complex and dynamic process influenced by a large variety of factors. These factors principally include past experience applicable to the anticipated costs of various types of claims, continually evolving and changing legal theories emanating from the judicial system, recurring accounting, statistical, and actuarial studies, the professional experience and expertise of the Company's claim departments' personnel or attorneys and independent claim adjusters, ongoing changes in claim frequency or severity patterns such as those caused by natural disasters, illnesses, accidents, work-related injuries, and changes in general and industry-specific economic conditions. Consequently, the reserves established are a reflection of the opinions of a large number of persons, of the application and interpretation of historical precedent and trends, of expectations as to future developments, and of management's judgment in interpreting all such factors. At any point in time, the Company is exposed to the possibility of higher or lower than anticipated loss costs due to all of these factors, and to the evolution, interpretation, and
8


expansion of tort law, as well as the effects of unexpected jury verdicts.

All reserves are therefore based on estimates which are periodically reviewed and evaluated in the light of emerging loss experience and changing circumstances. The resulting changes in estimates are recorded in operations of the periods during which they are made. Return and additional premiums and policyholders' dividends, all of which tend to be affected by development of losses in future years, may offset, in whole or in part, favorable or unfavorable loss developments for certain coverages such as workers' compensation, portions of which are written under loss sensitive programs that provide for such adjustments. Management believes that its overall reserving practices have been consistently applied over many years, and that its aggregate net reserves have generally resulted in reasonable approximations of the ultimate net costs of losses incurred. However, no representation is made nor is any guaranty given that ultimate net losses and related costs will not develop in future years to be significantly greater or lower than currently established reserve estimates.

The Company's accounting policy regarding the establishment of loss reserve estimates is described in Note 1 to the consolidated financial statements included in Old Republic's 2021 Annual Report on Form 10-K. Certain loss related financial statement captions and disclosures reflect minor wording changes when compared to the Company's 2021 Annual Report on Form 10-K.

Employee Benefit Plans - The Company has a closed pension plan (the "Plan") for certain employees under which benefits were frozen as of December 31, 2013. The underfunded status of the Plan is recognized as a net pension liability with offsetting entries reflected as a component of shareholders' equity in accumulated other comprehensive income, net of deferred taxes.

The Company also provides long-term incentive awards to certain employees. In March 2022, the Compensation Committee of the Company's Board of Directors approved the grant of stock-based awards to certain employees under the 2022 Incentive Compensation Plan which received shareholder approval in May 2022.

Note 2 - Investments

The amortized cost and estimated fair values by type and contractual maturity of fixed income securities are shown in the following tables. Expected maturities will differ from contractual maturities since borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
Fixed Income Securities by Type:
September 30, 2022:
U.S. & Canadian Governments $ 2,131.8  $ —  $ 122.0  $ 2,009.7 
Tax-exempt 897.7  —  26.2  871.5 
Corporate 8,577.1  1.7  618.3  7,960.5 
$ 11,606.7  $ 1.7  $ 766.7  $ 10,841.8 
December 31, 2021:
U.S. & Canadian Governments $ 2,121.6  $ 44.8  $ 7.9  $ 2,158.5 
Tax-exempt 944.9  44.3  —  989.2 
Corporate 7,372.1  220.0  64.2  7,527.9 
$ 10,438.6  $ 309.2  $ 72.2  $ 10,675.7 
Amortized
Cost
Estimated
Fair
Value
Fixed Income Securities Stratified by Contractual Maturity at September 30, 2022:
Due in one year or less $ 1,324.2  $ 1,311.0 
Due after one year through five years 5,605.1  5,331.7 
Due after five years through ten years 4,566.1  4,093.5 
Due after ten years 111.2  105.3 
$ 11,606.7  $ 10,841.8 

The following table reflects the Company's gross unrealized losses and fair value, aggregated by category and length of time that individual securities have been in an unrealized loss position. Fair value and issuer's cost comparisons follow:

9


Less than 12 Months 12 Months or Greater Total
Fair
Value
Unrealized Losses Fair
Value
Unrealized Losses Fair
Value
Unrealized Losses
September 30, 2022:
Fixed Income Securities:
  U.S. & Canadian Governments $ 1,601.5  $ 76.4  $ 408.2  $ 45.6  $ 2,009.7  $ 122.0 
  Tax-exempt 863.8  26.2  —  —  863.8  26.2 
  Corporate 6,842.1  513.7  799.9  104.6  7,642.0  618.3 
$ 9,307.4  $ 616.4  $ 1,208.1  $ 150.2  $ 10,515.6  $ 766.7 
Number of securities in
unrealized loss position 1,813  181  1,994 
December 31, 2021:
Fixed Income Securities:
  U.S. & Canadian Governments $ 761.8  $ 6.2  $ 43.2  $ 1.6  $ 805.0  $ 7.9 
  Corporate 2,032.8  55.5  174.1  8.7  2,207.0  64.2 
$ 2,794.7  $ 61.8  $ 217.3  $ 10.3  $ 3,012.0  $ 72.2 
Number of securities in
unrealized loss position 419  32  451 

In the above tables the unrealized losses on fixed income securities are primarily deemed to reflect changes in the interest rate environment. As part of its assessment of credit losses, the Company considers whether it intends to sell or is more likely than not required to sell securities, principally in consideration of its asset and liability maturity matching objectives. Net realized investment gains (losses) in the third quarter and first nine months of 2022 included $120.9 and $123.5, respectively, of losses on fixed income securities for which management intends to dispose of, principally due to tax planning considerations. No such losses were recognized during the same periods of 2021. The Company recorded no allowance for credit losses as of September 30, 2022, and December 31, 2021.

The following table shows cost and fair value information for equity securities:
Equity Securities

Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
September 30, 2022 $ 2,151.0  $ 953.7  $ 59.3  $ 3,045.4 
December 31, 2021 $ 3,766.5  $ 1,620.8  $ 84.5  $ 5,302.8 

During the third quarter and first nine months of 2022 and 2021, the Company recognized pretax unrealized investment gains (losses) of $(350.8) and $(641.8), respectively for 2022, and $(199.3) and $288.1, respectively for 2021, emanating from changes in the fair value of equity securities in the consolidated statements of income. Changes in the fair value of equity securities still held at September 30, 2022 and 2021 were $(215.8) and $(378.6) for the third quarter and first nine months of 2022, respectively, and $(178.3) and $245.9 for the third quarter and first nine months of 2021, respectively.

Fair Value Measurements - Fair value is defined as the estimated price that is likely to be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price) at the measurement date. A fair value hierarchy is established that prioritizes the sources ("inputs") used to measure fair value into three broad levels: Level 1 inputs are based on quoted market prices in active markets; Level 2 observable inputs are based on corroboration with available market data; and Level 3 unobservable inputs are based on uncorroborated market data or a reporting entity's own assumptions. Following is a description of the valuation methodologies and general classification used for financial instruments measured at fair value.

The Company uses quoted values and other data provided by a nationally recognized independent pricing source as inputs into its quarterly process for determining fair values of fixed income and equity securities. To validate the techniques or models used by pricing sources, the Company's review process includes, but is not limited to: (i) initial and ongoing evaluation of methodologies used by outside parties to calculate fair value; and (ii) comparisons with other sources including the fair value estimates based on current market quotations, and with independent fair value estimates provided by the independent investment custodian. The independent pricing source obtains market quotations and actual transaction prices for securities that have quoted prices in active markets and uses their own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of "matrix pricing" in which the independent pricing source uses observable market inputs including,
10


but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair value.

Level 1 securities include U.S. and Canadian Treasury notes, publicly traded common stocks, mutual funds, and short-term investments in highly liquid money market instruments. Level 2 securities generally include corporate bonds, municipal bonds, and certain U.S. and Canadian government agency securities. Securities classified within Level 3 include non-publicly traded bonds and equity securities. There were no significant changes in the fair value of Level 3 assets as of September 30, 2022 and December 31, 2021.

The following tables show a summary of the fair value of financial assets segregated among the various input levels described above:
Fair Value Measurements
As of September 30, 2022: Level 1 Level 2 Level 3 Total
Available for sale:
Fixed income securities:
U.S. & Canadian Governments $ 1,430.1  $ 579.6  $ —  $ 2,009.7 
Tax-exempt —  871.5  —  871.5 
Corporate —  7,940.0  20.5  7,960.5 
Short-term investments 1,371.5  —  —  1,371.5 
Equity securities $ 3,043.6  $ —  $ 1.7  $ 3,045.4 
As of December 31, 2021:
Available for sale:
Fixed income securities:
U.S. & Canadian Governments $ 1,453.8  $ 704.6  $ —  $ 2,158.5 
Tax-exempt —  989.2  —  989.2 
Corporate —  7,517.4  10.5  7,527.9 
Short-term investments 565.7  —  —  565.7 
Equity securities $ 5,300.8  $ —  $ 1.9  $ 5,302.8 

There were no transfers between Levels 1, 2 or 3 during the quarter ended September 30, 2022.


11


The following table reflects the composition of net investment income, net realized gains or losses, and the net change in unrealized investment gains or losses for each of the periods shown.
Quarters Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Investment income:
Fixed income securities $ 80.0  $ 67.3  $ 219.6  $ 209.7 
Equity securities 30.2  45.0  107.1  116.6 
Short-term investments 6.0  —  7.3  .1 
Other investments 1.2  .8  2.1  1.6 
Gross investment income 117.6  113.2  336.2  328.1 
Investment expenses 2.5  1.5  6.9  4.5 
Net investment income $ 115.1  $ 111.6  $ 329.2  $ 323.6 
Net investment gains (losses):
Realized from actual transactions:
Fixed income securities:
Gains $ .6  $ 1.0  $ .7  $ 2.6 
Losses (86.9) (.1) (146.2) (.7)
Net (86.3) .8  (145.4) 1.9 
Equity securities:
Gains 219.0  31.2  439.2  68.0 
Losses (38.1) (25.5) (79.2) (54.3)
Net 180.9  5.7  359.9  13.6 
Other investments, net —  —  1.3  — 
Total realized from actual transactions 94.7  6.6  215.8  15.6 
From impairments (120.9) —  (123.5) — 
From unrealized changes in fair value of equity securities (350.8) (199.3) (641.8) 288.1 
Total realized and unrealized investment gains (losses) (377.1) (192.6) (549.5) 303.7 
Current and deferred income taxes (credits) (79.2) (40.9) (115.6) 64.0 
Net of tax realized and unrealized investment gains (losses) $ (297.9) $ (151.6) $ (433.8) $ 239.6 
Changes in unrealized investment gains (losses)
reflected directly in shareholders' equity:
Fixed income securities $ (177.8) $ (68.3) $ (999.8) $ (249.2)
Less: Deferred income taxes (credits) (37.4) (14.4) (210.9) (52.6)
(140.4) (53.9) (788.8) (196.6)
Other investments (2.4) (.4) (9.5) (1.6)
Less: Deferred income taxes (credits) (.5) (.1) (1.9) (.3)
(1.9) (.3) (7.5) (1.3)
Net changes in unrealized investment gains (losses),
net of tax $ (142.3) $ (54.3) $ (796.3) $ (197.9)




12


Note 3 - Loss and Loss Adjustment Expenses

The following table shows changes in aggregate reserves for the Company's loss and loss adjustment expenses:

Nine Months Ended
September 30,
2022 2021
Gross reserves at beginning of period $ 11,425.5  $ 10,671.0 
Less: reinsurance losses recoverable 4,125.3  3,650.5 
Net reserves at beginning of period:
General Insurance 6,587.0  6,328.0 
Title Insurance 594.2  556.1 
RFIG Run-off 111.2  127.6 
Other 7.6  8.6 
Sub-total 7,300.2  7,020.4 
Incurred loss and loss adjustment expenses:
Provisions for insured events of the current year:
General Insurance 1,886.4  1,802.9 
Title Insurance 107.6  118.0 
RFIG Run-off 12.3  14.8 
Other 6.8  9.0 
Sub-total 2,013.3  1,944.8 
Change in provision for insured events of prior years:
General Insurance (92.2) (77.0)
Title Insurance (22.9) (22.6)
RFIG Run-off (29.8) (11.4)
Other (3.1) (3.3)
Sub-total (148.2) (114.4)
Total incurred loss and loss adjustment expenses 1,865.1  1,830.4 
Payments:
Loss and loss adjustment expenses attributable to
   insured events of the current year:
General Insurance 550.1  523.9 
Title Insurance 8.1  17.7 
RFIG Run-off .1  .2 
Other 3.7  4.9 
Sub-total 562.2  546.8 
Loss and loss adjustment expenses attributable to
   insured events of prior years:
General Insurance 977.7  971.4 
Title Insurance 47.1  40.9 
RFIG Run-off 11.7  12.3 
Other 1.1  1.3 
Sub-total 1,037.7  1,026.0 
Total payments 1,599.9  1,572.8 
Net reserves at end of period:
General Insurance 6,853.4  6,558.5 
Title Insurance 623.5  592.8 
RFIG Run-off 81.9  118.5 
Other 6.4  8.0 
Sub-total 7,565.3  7,278.0 
Reinsurance losses recoverable 4,609.3  4,155.7 
Gross reserves at end of period $ 12,174.7  $ 11,433.7 

For the nine months ended September 30, 2022, all operating segments experienced favorable loss reserve development. General Insurance favorable development came predominantly from the commercial auto and workers' compensation lines of coverage. This was partially offset by unfavorable development in the financial indemnity (which includes public company D&O) line of coverage, stemming from large security class action claims activity occurring from accident years 2018 and 2019, and to a lesser extent, general liability coverages. Favorable development
13


experienced from Title Insurance occurred largely within the 2017-2019 policy years, while RFIG Run-off was driven by positive trends in delinquency cure rates.

Note 4 - Income Taxes

Tax positions taken or expected to be taken in a tax return by the Company are recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. To the best of management's knowledge, there are no tax uncertainties that are expected to result in significant increases or decreases to unrecognized tax benefits within the next twelve month period. The Company views its income tax exposures as primarily consisting of timing differences whereby the ultimate deductibility of a taxable amount is highly certain but the timing of its deductibility is uncertain. The Company classifies interest and penalties as income tax expense in the consolidated statement of income. The Company is not currently under audit by the IRS and 2019 and subsequent tax years remain open.

Note 5 - Net Income Per Share

Consolidated basic earnings per share excludes the dilutive effect of common stock equivalents and is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares actually outstanding for the periods presented. Diluted earnings per share are similarly calculated with the inclusion of dilutive common stock equivalents. The following table provides a reconciliation of net income (loss) and the number of shares used in basic and diluted earnings per share calculations.
Quarters Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Numerator:
Basic and diluted earnings per share -
income (loss) available to common stockholders $ (91.7) $ 88.7  $ 174.3  $ 907.3 
Denominator:
Basic earnings per share -
weighted-average shares (a) 303,652,802  301,577,493  303,797,001  301,247,397 
Effect of dilutive securities - stock based
   compensation awards —  1,961,865  1,584,347  1,661,091 
Diluted earnings per share -
adjusted weighted-average shares (a) 303,652,802 303,539,358 305,381,348 302,908,488
Earnings per share: Basic $ (.31) $ .29  $ .57  $ 3.01 
Diluted $ (.31) $ .29  $ .57  $ 3.00 
Anti-dilutive common stock equivalents
excluded from earnings per share computations:
Stock based compensation awards 10,651,301  —  2,653,750  292,500 
__________

(a) In calculating earnings per share, pertinent accounting standards require that common shares owned by the Company's Employee Savings and Stock Ownership Plan that are not yet allocated to participants in the plan be excluded from the calculation. Such shares are issued and outstanding, and have the same voting and other rights applicable to all common shares.

Note 6 - Credit Losses

Credit losses on financial assets measured at amortized cost, primarily the Company's reinsurance recoverables and accounts and notes receivable, are recognized based on estimated losses expected to occur over the life of the asset. The expected credit losses, and subsequent adjustment to such losses, are recorded through an allowance account that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the asset presented on the consolidated balance sheets.

The Company's credit allowance was comprised of $16.0 related to reinsurance recoverables as of both September 30, 2022 and December 31, 2021, and $27.7 and $24.1 related to accounts and notes receivable, as of September 30, 2022 and December 31, 2021, respectively.

The Company's evaluation of credit allowances on available for sale fixed income securities is discussed further in Note 2. The Company is not exposed to material concentrations of credit risks as to any one issuer of investment securities.

14


Note 7 - Debt

Consolidated debt of Old Republic and its subsidiaries is summarized below:
September 30, 2022 December 31, 2021
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Senior Notes:
4.875% issued in 2014 and due 2024 $ 398.8  $ 400.3  $ 398.4  $ 435.8 
3.875% issued in 2016 and due 2026 547.8  520.5  547.3  597.0 
3.850% issued in 2021 and due 2051 642.8  455.0  642.6  702.9 
Other miscellaneous debt 7.1  7.1  —  — 
Total debt $ 1,596.6  $ 1,383.1  $ 1,588.5  $ 1,735.7 

Fair Value Measurements - The Company utilizes indicative market prices, which incorporate recent actual market transactions and current bid/ask quotations to estimate the fair value of outstanding debt securities that are classified within Level 2 of the fair value hierarchy as presented below. The Company used an internally generated interest yield market matrix table, which incorporates maturity, coupon rate, credit quality, structure and current market conditions to estimate the fair value of its outstanding debt securities that were classified within Level 3.

The following table shows a summary of financial liabilities disclosed, but not carried at fair value, segregated among the various input levels described in Note 3 above:
Carrying Fair
Value Value Level 1 Level 2 Level 3
Financial Liabilities:
Debt:
September 30, 2022 $ 1,596.6  $ 1,383.1  $ —  $ 1,375.9  $ 7.1 
December 31, 2021 $ 1,588.5  $ 1,735.7  $ —  $ 1,735.7  $ — 

Note 8 - Common Share Repurchases

On August 18, 2022, the Board of Directors authorized a $450.0 share repurchase program. During the quarter, the Company repurchased $104.8 of common shares (4.8 million shares at an average price of $21.49 per share). Following the close of the quarter and through November 3, the Company repurchased 6.0 million additional shares for $136.8 (average price of $22.48), leaving $208.2 remaining under the current repurchase authorization.

Note 9 - Commitments and Contingent Liabilities

Legal Proceedings - Legal proceedings against the Company and its subsidiaries routinely arise in the normal course of business and usually pertain to claim matters related to insurance policies and contracts issued by its insurance subsidiaries. At September 30, 2022, the Company had no material non-claim litigation exposures in its consolidated business.

Note 10 - Information About Segments of Business

The Company is engaged in the single business of insurance underwriting and related services. It conducts its operations through a number of regulated insurance company subsidiaries organized into three major segments: General Insurance (property and liability insurance), Title Insurance and the Republic Financial Indemnity Group ("RFIG") Run-off. The results of a small life and accident insurance business are included within the Corporate & Other caption of this report. Old Republic's business is managed for the long run. In this context management's key objectives are to achieve highly profitable operating results over the long term, 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 (losses). Under GAAP, however, net income, inclusive of investment gains (losses), is the measure of total profitability. In management's opinion, the focus on income excluding investment gains (losses), also described herein as segment pretax operating income (loss), provides a better way to analyze, evaluate, and establish accountability for the results of the insurance operations. The inclusion of realized investment gains (losses) in net income can mask trends in operating results, because such realizations are often highly discretionary. Similarly, the inclusion of unrealized investment gains (losses) in equity securities can further distort such operating results with significant period-to-period fluctuations. The contributions of Old Republic's insurance industry segments to consolidated totals are shown in the following table.








15


Quarters Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
General Insurance:
Net premiums earned $ 967.3  $ 902.8  $ 2,821.8  $ 2,629.2 
Net investment income and other income 128.3  121.7  367.8  367.4 
Total revenues excluding investment gains (losses) $ 1,095.6  $ 1,024.6  $ 3,189.7  $ 2,996.7 
Segment pretax operating income (loss) (a) $ 167.6  $ 145.8  $ 448.1  $ 410.0 
Income tax expense (credits) $ 34.0  $ 29.0  $ 89.0  $ 79.9 
Title Insurance:
Net premiums earned $ 887.1  $ 1,028.5  $ 2,731.2  $ 2,879.6 
Title, escrow and other fees 80.9  113.6  266.1  339.1 
Sub-total 968.1  1,142.1  2,997.3  3,218.7 
Net investment income and other income 12.0  11.2  35.0  33.3 
Total revenues excluding investment gains (losses) $ 980.1  $ 1,153.3  $ 3,032.3  $ 3,252.0 
Segment pretax operating income (loss) (a) $ 73.3  $ 135.7  $ 263.8  $ 378.3 
Income tax expense (credits) $ 16.1  $ 29.8  $ 56.2  $ 80.8 
RFIG Run-off:
Net premiums earned $ 5.5  $ 7.7  $ 18.1  $ 25.4 
Net investment income and other income 1.5  2.6  5.2  8.7 
Total revenues excluding investment gains (losses) $ 7.1  $ 10.3  $ 23.3  $ 34.2 
Segment pretax operating income (loss) $ 9.2  $ 8.4  $ 31.3  $ 20.9 
Income tax expense (credits) $ 1.9  $ 1.6  $ 6.4  $ 4.0 
Consolidated Revenues:
Total revenues of Company segments $ 2,083.0  $ 2,188.3  $ 6,245.4  $ 6,283.0 
Corporate & other (b) 53.2  50.1  146.9  122.0 
Consolidated investment gains (losses):
Realized from actual transactions and impairments (26.2) 6.6  92.3  15.6 
Unrealized from changes in fair value of equity securities (350.8) (199.3) (641.8) 288.1 
Total realized and unrealized investment gains (losses) (377.1) (192.6) (549.5) 303.7 
Consolidation elimination adjustments (37.9) (33.6) (104.6) (87.7)
Consolidated revenues $ 1,721.0  $ 2,012.2  $ 5,738.1  $ 6,621.0 
Consolidated Pretax Income (Loss):
Total segment pretax operating income (loss) of
Company segments $ 250.2  $ 290.0  $ 743.3  $ 809.3 
Corporate & other (b) 7.2  8.6  14.6  19.5 
Consolidated investment gains (losses):
Realized from actual transactions and impairments (26.2) 6.6  92.3  15.6 
Unrealized from changes in fair value of equity securities (350.8) (199.3) (641.8) 288.1 
Total realized and unrealized investment gains (losses) (377.1) (192.6) (549.5) 303.7 
Consolidated income (loss) before income
   taxes (credits) $ (119.6) $ 106.0  $ 208.3  $ 1,132.6 
Consolidated Income Tax Expense (Credits):
Total income tax expense (credits)
of Company segments $ 52.0  $ 60.5  $ 151.8  $ 164.8 
Corporate & other (b) (.7) (2.3) (2.0) (3.6)
Income tax expense (credits) on consolidated realized
and unrealized investment gains (losses) (79.2) (40.9) (115.6) 64.0 
Consolidated income tax expense (credits) $ (27.8) $ 17.2  $ 34.0  $ 225.2 
16


September 30, December 31,
2022 2021
Consolidated Assets:
General Insurance $ 21,054.4  $ 20,660.9 
Title Insurance 2,016.7  2,234.2 
RFIG Run-off 379.0  516.4 
Total assets of company segments 23,450.2  23,411.6 
Corporate & other (b) 1,672.9  1,716.3 
Consolidation elimination adjustments (176.1) (146.1)
Consolidated assets $ 24,947.0  $ 24,981.8 

(a)    Segment pretax operating income (loss) is reported net of interest charges on intercompany financing arrangements with Old Republic's holding company parent for the following segments: General - $17.5 and $50.2 compared to $15.9 and $47.7 for the quarters and nine months ended September 30, 2022 and 2021, respectively, and Title - $- and $.8 compared to $.4 and $1.4 for the quarters and nine months ended September 30, 2022 and 2021, respectively.
(b)    Includes amounts for a small life and accident insurance business as well as those of the parent holding company and several internal corporate services subsidiaries.

17


OLD REPUBLIC INTERNATIONAL CORPORATION
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS
Nine Months Ended September 30, 2022 and 2021
($ in Millions, Except Share Data)
OVERVIEW

This management analysis of financial position and results of operations pertains to the consolidated accounts of Old Republic International Corporation ("Old Republic", "ORI", or "the Company"). The Company conducts its operations through a number of regulated insurance company subsidiaries organized into three major segments: General Insurance (property and liability insurance), Title Insurance and Republic Financial Indemnity Group ("RFIG") Run-off. A small life and accident insurance business, accounting for .1% of consolidated operating revenues for the nine months ended September 30, 2022 and .5% of consolidated assets as of that date, is included within the Corporate & Other caption of this report.

The consolidated accounts are presented in conformity with the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") of accounting principles generally accepted in the United States of America ("GAAP"). As a publicly held company, Old Republic utilizes GAAP to comply with the financial reporting requirements of the Securities and Exchange Commission ("SEC"). From time to time the FASB and the SEC issue various releases, many of which require additional financial statement disclosures and provide related application guidance. Recent guidance issued by the FASB is summarized further in the Notes to Consolidated Financial Statements where applicable.

As a state regulated financial institution vested with the public interest, however, business of the Company's insurance subsidiaries is managed pursuant to the laws, regulations, and accounting practices of the various states in the U.S. and those of a small number of other jurisdictions outside the U.S. in which they operate. In comparison with GAAP, the statutory accounting practices generally reflect greater conservatism and comparability among insurers, and are intended to address the primary financial security interests of policyholders and their beneficiaries. Additionally, these practices also affect a significant number of important factors such as product pricing, risk bearing capacity and capital adequacy, the determination of Federal income taxes payable currently among ORI's tax-consolidated entities, and the upstreaming of dividends by insurance subsidiaries to the parent holding company. The major differences between these statutory financial accounting practices and GAAP are summarized in Note 1 to the consolidated financial statements included in Old Republic's 2021 Annual Report on Form 10-K.

The insurance business is distinguished from most others in that the prices (premiums) charged for most products are set without knowing what the ultimate loss costs will be. We also can't know exactly when claims will be paid, which may be many years after a policy was issued or expired. This 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 maintaining a sound financial condition to support our subsidiaries' long-term obligations to policyholders and their beneficiaries. To achieve these objectives, adherence to insurance risk management principles is stressed, and asset diversification and quality are emphasized. In addition, management engages in an ongoing assessment of operating risks, such as cybersecurity risks, that could adversely affect the Company's business and reputation.

In addition to income arising from Old Republic's basic underwriting and related services functions, significant investment income is earned from invested funds generated by those functions and from capital resources. Investment management aims for stability of income from interest and dividends, protection of capital, and for sufficiency of liquidity to meet insurance underwriting and other obligations as they become payable in the future. Securities trading and the realization of capital gains are not primary objectives. The investment philosophy is therefore best characterized as emphasizing value, credit quality, and relatively long-term holding periods. The Company's ability to hold both fixed income and equity securities for long periods of time is enabled by the scheduling of maturities in contemplation of an appropriate matching of assets and liabilities, and by investments in large capitalization, highly liquid equity securities.

In light of the above factors, the Company is managed for the long run and with little regard for quarterly or even annual reporting periods. These time frames are too short. Management believes results are best evaluated by looking at underwriting and overall operating performance trends over 10-year intervals. These likely include one or two economic and/or underwriting cycles. This provides enough time for these cycles to run their course, for underwriting and premium rate changes to appear in financial results, and for reserved loss costs to be quantified with greater certainty.

This management analysis should be read in conjunction with the consolidated financial statements and the footnotes appended to them.

18


EXECUTIVE SUMMARY

Old Republic International Corporation reported the following consolidated results:

OVERALL RESULTS
Quarters Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
Pretax income (loss) $ (119.6) $ 106.0  $ 208.3  $ 1,132.6 
Pretax investment gains (losses) (377.1) (192.6) (549.5) 303.7 
Pretax income (loss) excluding investment gains (losses) $ 257.5  $ 298.6  (13.8) % $ 757.9  $ 828.8  (8.6) %
Net income (loss) $ (91.7) $ 88.7  $ 174.3  $ 907.3 
Net of tax investment gains (losses) (297.9) (151.6) (433.8) 239.6 
Net income (loss) excluding investment gains (losses) $ 206.1  $ 240.4  (14.3) % $ 608.1  $ 667.6  (8.9) %
Combined ratio 91.4  % 89.8  % 91.4  % 90.4  %
PER DILUTED SHARE
Quarters Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
Net income (loss) $ (.31) $ .29  $ .57  $ 3.00 
Net of tax investment gains (losses) (.99) (.50) (1.42) .79 
Net income (loss) excluding investment gains (losses) $ .68  $ .79  (13.9) % $ 1.99  $ 2.21  (10.0) %
SHAREHOLDERS' EQUITY (BOOK VALUE)
Sep. 30, Dec. 31,
2022 2021 % Change
Total $ 5,678.1  $ 6,893.2  (17.6) %
Per Common Share $ 18.92  $ 22.76  (16.9) %

Old Republic International Corporation reported pretax income, excluding investment gains (losses), of $257.5 for the quarter and $757.9 for the first nine months of 2022. Results are within expectations, with General Insurance pretax operating income rising 15%, while the effect of increasing mortgage interest rates contributed to a reduction in Title Insurance pretax operating income of 46%. Both General Insurance and Title Insurance produced solid underwriting results that drove a consolidated combined ratio of 91.4% for both the quarter and first nine months of 2022.

Consolidated net premiums and fees earned were down 5.5% for the quarter, with General Insurance net earned premiums growing 7.1%, offset by a 15.2% decline in Title Insurance net premiums and fees earned as a result of lower revenues in both direct and agency operations. For the first nine months, consolidated net premiums and fees earned were relatively steady, reflecting growth in General Insurance of 7.3%, offset by a 6.9% decline in Title Insurance. Net investment income increased in both 2022 periods, primarily reflecting growth in the invested asset base and slightly higher investment yields earned in the quarter.

During the quarter, the Company returned total capital to shareholders of $479.1, comprised of $374.3 in common stock dividends, including a special cash dividend of $1.00 per share, and $104.8 of share repurchases (4.8 million shares at an average price of $21.49 per share). Following the close of the quarter and through November 3, the Company repurchased 6.0 million additional shares for $136.8 (average price of $22.48), leaving $208.2 remaining under the current repurchase authorization.

Book value per share was $18.92 as of September 30, 2022, reflecting declining fair market values in both the fixed income and equity portfolios, partially offset by strong operating earnings. With the addition of dividends declared during the first nine months, this was a decrease of 9.4% over year-end 2021.



19


Old Republic's business is managed for the long run. In this context management's key objectives are to achieve highly profitable operating results over the long term, 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 (losses). Under Generally Accepted Accounting Principles (GAAP), however, net income, inclusive of investment gains (losses), is the measure of total profitability.

In management's opinion, the focus on income excluding investment gains (losses), also described herein as segment pretax operating income (loss), provides a better way to analyze, evaluate, and establish accountability for the results of the insurance operations. The inclusion of realized investment gains (losses) in net income can mask trends in operating results, because such realizations are often highly discretionary. Similarly, the inclusion of unrealized investment gains (losses) in equity securities can further distort such operating results with significant period-to-period fluctuations.

FINANCIAL HIGHLIGHTS
Quarters Ended September 30, Nine Months Ended September 30,
SUMMARY INCOME STATEMENTS: 2022 2021 % Change 2022 2021 % Change
Revenues:
Net premiums and fees earned $ 1,943.3  $ 2,055.4  (5.5) % $ 5,844.6  $ 5,881.6  (0.6) %
Net investment income 115.1  111.6  3.1  329.2  323.6  1.7 
Other income 39.7  37.8  5.2  113.7  112.0  1.5 
Total operating revenues 2,098.2  2,204.9  (4.8) 6,287.7  6,317.3  (0.5)
Investment gains (losses):
Realized from actual transactions and impairments (26.2) 6.6  92.3  15.6 
Unrealized from changes in fair value of equity securities (350.8) (199.3) (641.8) 288.1 
Total investment gains (losses) (377.1) (192.6) (549.5) 303.7 
Total revenues 1,721.0  2,012.2  5,738.1  6,621.0 
Operating expenses:
Loss and loss adjustment expenses 628.6  618.4  1.6  1,875.2  1,846.8  1.5 
Sales and general expenses 1,195.8  1,270.8  (5.9) 3,604.5  3,601.8  0.1 
Interest and other charges 16.3  16.8  (3.4) 49.9  39.7  25.7 
Total operating expenses 1,840.7  1,906.2  (3.4) % 5,529.7  5,488.4  0.8  %
Pretax income (loss) (119.6) 106.0  208.3  1,132.6 
Income taxes (credits) (27.8) 17.2  34.0  225.2 
Net income (loss) $ (91.7) $ 88.7  $ 174.3  $ 907.3 
COMMON STOCK STATISTICS:
Components of net income (loss) per share:
Basic net income (loss) excluding investment gains (losses)
$ 0.68  $ 0.79  (13.9) % $ 2.00  $ 2.22  (9.9) %
Net investment gains (losses):
Realized from actual transactions and impairments (0.07) 0.02  0.24  0.04 
Unrealized from changes in fair value of equity securities (0.92) (0.52) (1.67) 0.75 
Basic net income (loss) $ (0.31) $ 0.29  $ 0.57  $ 3.01 
Diluted net income (loss) excluding investment gains (losses)
$ 0.68  $ 0.79  (13.9) % $ 1.99  $ 2.21  (10.0) %
Net investment gains (losses):
Realized from actual transactions and impairments (0.07) 0.02  0.24  0.04 
Unrealized from changes in fair value of equity securities (0.92) (0.52) (1.66) 0.75 
Diluted net income (loss) $ (0.31) $ 0.29  $ 0.57  $ 3.00 
Cash dividends on common stock $ 1.23  $ 1.72  $ 1.69  $ 2.16 
Book value per share $ 18.92  $ 20.96  (9.7) %
We believe the information presented in the following table highlights the most meaningful indicators of ORI's segmented and consolidated financial performance. The information underscores the performance of our underwriting operations, as well as our sound investment of the capital and underwriting cash flows from these operations.


20


Sources of Consolidated Income (Loss)
Quarters Ended September 30, Nine Months Ended September 30,
2022 2021 % Change 2022 2021 % Change
Net premiums and fees earned:
General insurance $ 967.3  $ 902.8  7.1  % $ 2,821.8  $ 2,629.2  7.3  %
Title insurance 968.1  1,142.1  (15.2) 2,997.3  3,218.7  (6.9)
RFIG run-off 5.5  7.7  (28.0) 18.1  25.4  (28.7)
Corporate & other 2.3  2.6  (12.8) 7.2  8.2  (11.6)
Consolidated $ 1,943.3  $ 2,055.4  (5.5) % $ 5,844.6  $ 5,881.6  (0.6) %
Underwriting and related services income (loss):
General insurance $ 96.2  $ 77.7  23.8  % $ 243.6  $ 202.0  20.6  %
Title insurance 61.1  125.3  (51.2) 230.0  347.8  (33.9)
RFIG run-off 7.6  5.8  31.7  26.1  12.1  114.3 
Corporate & other (6.3) (4.9) (28.5) (21.2) (17.1) (23.7)
Consolidated $ 158.6  $ 203.9  (22.2) % $ 478.6  $ 544.9  (12.2) %
Consolidated underwriting ratio:
Loss ratio:
Current year 35.7  % 32.4  % 34.7  % 33.4  %
Prior years (3.4) (2.3) (2.6) (2.0)
Total 32.3  30.1  32.1  31.4 
Expense ratio 59.1  59.7  59.3  59.0 
Combined ratio 91.4  % 89.8  % 91.4  % 90.4  %
Net investment income:
General insurance $ 88.8  $ 84.2  5.4  % $ 254.8  $ 256.2  (0.5) %
Title insurance 11.8  10.9  8.7  34.2  32.5  5.5 
RFIG run-off 1.5  2.6  (39.7) 5.2  8.7  (40.3)
Corporate & other 12.9  13.8  (6.9) 34.8  26.1  33.6 
Consolidated $ 115.1  $ 111.6  3.1  % $ 329.2  $ 323.6  1.7  %
Interest and other charges (credits):
General insurance $ 17.3  $ 16.1  $ 50.3  $ 48.2 
Title insurance (0.3) 0.4  0.5  1.9 
RFIG run-off —  —  —  — 
Corporate & other (a) (0.7) 0.2  (0.9) (10.5)
Consolidated $ 16.3  $ 16.8