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UNITED STATES |
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SECURITIES AND EXCHANGE COMMISSION |
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Washington, D. C. 20549 |
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FORM |
10-Q |
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☒ |
Quarterly report pursuant to section 13 or 15(d) of the Security
Exchange Act of 1934 |
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for the quarterly period ended: |
September 30, 2022 |
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or |
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☐ |
Transition report pursuant to section 13 or 15(d) of the Security
Exchange Act of 1934 |
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Commission File Number: |
001-10607 |
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OLD REPUBLIC INTERNATIONAL CORPORATION |
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(Exact name of registrant as specified in its charter) |
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Delaware |
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36-2678171 |
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(State or other jurisdiction of |
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(IRS Employer Identification No.) |
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incorporation or organization) |
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307 North Michigan Avenue |
Chicago |
Illinois |
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60601 |
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(Address of principal executive office) |
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(Zip Code) |
Registrant's telephone number, including area code:
312-346-8100
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common Stock / $1 par value |
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ORI |
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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.
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Large accelerated filer
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☒ |
Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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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:
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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
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OLD REPUBLIC INTERNATIONAL CORPORATION |
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Report on Form 10-Q / September 30, 2022 |
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INDEX |
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PAGE NO. |
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PART I |
FINANCIAL INFORMATION: |
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CONSOLIDATED BALANCE SHEETS |
3 |
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CONSOLIDATED STATEMENTS OF INCOME |
4 |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
5 |
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CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND COMMON |
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SHAREHOLDERS' EQUITY |
6 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
7 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
8 - 17 |
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MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF
OPERATIONS |
18 - 40 |
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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK |
41 |
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CONTROLS AND PROCEDURES |
41 |
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PART II |
OTHER INFORMATION: |
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ITEM 1 - LEGAL PROCEEDINGS |
42 |
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ITEM 1A - RISK FACTORS |
42 |
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ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS |
42 |
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ITEM 6 - EXHIBITS |
42 |
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SIGNATURE |
43 |
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EXHIBIT INDEX |
44 |
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Old Republic International Corporation and Subsidiaries |
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Consolidated Balance Sheets |
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($ in Millions, Except Share Data) |
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(Unaudited) |
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September 30, |
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December 31, |
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2022 |
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2021 |
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Assets |
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Investments: |
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Available for sale: |
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Fixed income securities (at fair value) (amortized cost: $11,606.7
and $10,438.6) |
$ |
10,841.8 |
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$ |
10,675.7 |
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Short-term investments (at fair value which approximates
cost) |
1,371.5 |
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565.7 |
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Total |
12,213.3 |
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11,241.4 |
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Equity securities (at fair value) (cost: $2,151.0 and
$3,766.5) |
3,045.4 |
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5,302.8 |
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Other investments |
30.3 |
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32.0 |
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Total Investments |
15,289.1 |
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16,576.3 |
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Other Assets: |
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Cash |
102.4 |
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158.1 |
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Accrued investment income |
100.2 |
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84.4 |
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Accounts and notes receivable |
2,096.9 |
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1,768.7 |
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Federal income tax recoverable: Current |
— |
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11.8 |
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Deferred |
127.4 |
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— |
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Reinsurance balances and funds held |
330.0 |
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258.1 |
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Reinsurance recoverable: Paid losses |
136.8 |
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118.2 |
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Policy and loss reserves |
5,542.8 |
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4,825.1 |
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Deferred policy acquisition costs |
386.7 |
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350.4 |
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Sundry assets |
834.2 |
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830.3 |
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Total Other Assets |
9,657.9 |
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8,405.5 |
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Total Assets |
$ |
24,947.0 |
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$ |
24,981.8 |
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Liabilities, Preferred Stock, and Common Shareholders'
Equity |
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Liabilities: |
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Loss and loss adjustment expense reserves |
$ |
12,174.7 |
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$ |
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
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
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.
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) |
|
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
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.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $1.4
for the quarters and nine months ended September 30, 2022 and 2021,
respectively.
(b) Includes amounts for a small life and
accident insurance business as well as those of the parent holding
company and several internal corporate services
subsidiaries.
OLD REPUBLIC INTERNATIONAL CORPORATION
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF
OPERATIONS
Nine Months Ended September 30, 2022 and 2021
($ in Millions, Except Share Data)
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.
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.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
|