-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LqZXIS+GhQ1aoBCnkzTIeInIF1S/Pxb4fIcf4Oxb/GpMlIJOJClNwO9XBQVMqjgN QiVIBuB95OBQAEyuGiF7Ig== 0000074260-98-000022.txt : 19980814 0000074260-98-000022.hdr.sgml : 19980814 ACCESSION NUMBER: 0000074260-98-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLD REPUBLIC INTERNATIONAL CORP CENTRAL INDEX KEY: 0000074260 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] IRS NUMBER: 362678171 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10607 FILM NUMBER: 98684593 BUSINESS ADDRESS: STREET 1: 307 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3123468100 MAIL ADDRESS: STREET 1: 307 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60601 10-Q 1 OR INTERNATIONAL FORM 10-Q FILING SECURITIES AND EXCHANGE COMMISSION OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10 - Q [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1998 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-4625 OLD REPUBLIC INTERNATIONAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware No. 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 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_X_ No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Shares Outstanding Class June 30, 1998 --------------------------- --------------------------- Common Stock / $1 par value 137,123,699 * * Excludes 6,182,878 common shares issued, outstanding and held by an affiliate, which are classified as treasury stock for financial accounting purposes only. There are 12 pages contained in this report. 2 OLD REPUBLIC INTERNATIONAL CORPORATION Report on Form 10-Q / June 30, 1998 INDEX - ------------------------------------------------------------------------------- PAGE NO. -------- PART I FINANCIAL INFORMATION: CONSOLIDATED SUMMARY BALANCE SHEETS 3 CONSOLIDATED SUMMARY STATEMENTS OF INCOME 4 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 5 CONSOLIDATED STATEMENTS OF CASH FLOWS 6 NOTES TO CONSOLIDATED SUMMARY FINANCIAL STATEMENTS 7 MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS 8 - 10 PART II OTHER INFORMATION 11 & 12 3 OLD REPUBLIC INTERNATIONAL CORPORATION CONSOLIDATED SUMMARY BALANCE SHEETS (Unaudited) ($ in Millions) - ----------------------------------------------------------------------------------------------------------------------- June 30, December 31, 1998 1997 ------------ ------------ Assets Investments: Held to maturity: Fixed maturity securities (at amortized cost) (fair value: $2,397.9 and $2,306.1) $2,341.0 $2,249.7 Other long-term investments (at cost) 23.8 15.4 ------------ ------------ Total 2,364.8 2,265.1 ------------ ------------ Available for sale: Fixed maturity securities (at fair value) (cost: $1,961.3 and $1,954.5) 2,020.5 2,009.9 Equity securities (at fair value) (cost: $101.0 and $60.9) 144.8 117.1 Short-term investments (at fair value which approximates cost) 251.6 328.0 ------------ ------------ Total 2,417.0 2,455.2 ------------ ------------ Total investments 4,781.8 4,720.4 ------------ ------------ Other Assets: Cash 25.2 26.9 Accrued investment income 73.4 72.5 Accounts and notes receivable 319.7 320.0 Reinsurance balances and funds held 84.3 88.5 Reinsurance recoverable: Paid losses 24.0 27.2 Policy and claim reserves 1,300.5 1,333.5 Deferred policy acquisition costs 131.0 126.2 Sundry assets 218.9 207.9 ------------ ------------ 2,177.4 2,203.0 ------------ ------------ Total Assets $6,959.2 $6,923.4 ============ ============ - ------------------------------------------------------------------------------------------------------------------------- Liabilities, Preferred Stock and Common Shareholders' Equity Liabilities: Future policy benefits $181.1 $183.3 Losses, claims and settlement expenses 3,464.1 3,529.7 Unearned premiums 359.1 375.8 Other policyholders' benefits and funds 57.4 61.1 ------------ ------------ Total policy liabilities and accruals 4,061.8 4,150.0 Commissions, expenses, fees and taxes 117.2 124.0 Reinsurance balances and funds 141.2 148.2 Federal income tax payable: Current 8.4 4.3 Deferred 138.7 108.3 Debt and debt equivalents 146.0 142.9 Sundry liabilities 96.8 92.2 ------------ ------------ Total liabilities 4,710.4 4,770.2 ------------ ------------ Preferred Convertible preferred stock 1.0 1.0 Stock: ------------ ------------ Total preferred stock 1.0 1.0 ------------ ------------ Common Common stock 155.5 103.1 Shareholders' Additional paid-in capital 620.4 604.3 Equity: Unallocated shares - ESSOP (5.1) (6.1) Retained earnings 1,571.1 1,486.8 Accumulated other comprehensive income 57.7 64.4 Treasury stock (at cost) (152.0) (100.5) ------------ ------------ Total common shareholder's equity 2,247.7 2,152.1 ------------ ------------ Total Liabilities, Preferred Stock and Common Shareholders' Equity $6,959.2 $6,923.4 ============ ============ See accompanying notes.
4 OLD REPUBLIC INTERNATIONAL CORPORATION CONSOLIDATED SUMMARY STATEMENTS OF INCOME (Unaudited) ($ in Millions, Except Common Share Data) - ----------------------------------------------------------------------------------------------------------------- Quarters Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenues: Net premiums earned $391.6 $361.8 $751.2 $707.6 Title, escrow and other fees 63.4 40.7 113.3 72.5 Net investment income 67.9 65.9 136.5 133.6 Realized investment gains 5.5 5.3 25.5 16.1 Other income 7.9 18.7 16.4 24.4 ------------ ------------ ------------ ------------ Net revenues 536.6 492.6 1,043.1 954.4 ------------ ------------ ------------ ------------ Expenses: Benefits, claims and settlement expenses 189.0 192.2 374.7 385.7 Underwriting, acquisition and insurance expenses 227.7 176.4 425.9 347.2 Interest and other expenses 3.5 3.0 7.1 6.1 ------------ ------------ ------------ ------------ Total expenses 420.3 371.8 807.9 739.0 ------------ ------------ ------------ ------------ Income before income taxes and items below 116.2 120.8 235.2 215.3 ------------ ------------ ------------ ------------ Income Taxes: Currently payable 18.5 19.7 42.1 39.2 Deferred 17.7 13.0 32.0 23.1 ------------ ------------ ------------ ------------ Total income taxes 36.2 32.7 74.1 62.3 ------------ ------------ ------------ ------------ 80.0 88.0 161.0 153.0 Other items - net 0.3 0.2 0.9 0.5 ------------ ------------ ------------ ------------ Net Income: $80.4 $88.3 $161.9 $153.5 ============ ============ ============ ============ Net Income Per Share: Basic $0.58 $0.67 $1.17 $1.17 ============ ============ ============ ============ Diluted $0.57 $0.62 $1.15 $1.08 ============ ============ ============ ============ Dividends Per Common Share: Cash dividends $0.100 $0.087 $0.187 $0.160 ============ ============ ============ ============ Stock dividends --% --% 50% --% ============ ============ ============ ============ Average number of common and common equivalent shares outstanding: Basic 137,756,505 130,383,032 138,261,741 130,392,387 ============ ============ ============ ============ Diluted 139,993,613 141,494,007 140,435,405 141,789,243 ============ ============ ============ ============ See accompanying notes.
5 OLD REPUBLIC INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) ($ in Millions, Except Common Share Data) - ----------------------------------------------------------------------------------------------------------------- Quarters Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Net income as reported $80.4 $88.3 $161.9 $153.5 ------------ ------------ ------------ ------------ Other comprehensive income, before tax: Foreign currency translation adjustment (1.0) 2.9 (0.7) 2.5 ------------ ------------ ------------ ------------ Unrealized gains (losses) on securities: Unrealized gains (loses) arising during period 2.8 43.2 16.1 15.1 Less: eliminatin of pre-tax realized gains included in net income 5.5 5.3 25.5 16.1 ------------ ------------ ------------ ------------ Net unrealized gains (losses) on securities (2.7) 37.8 (9.3) (1.0) ------------ ------------ ------------ ------------ Income tax (credits) related to items of other comprehensive income (1.0) 13.2 (3.3) (0.4) ------------ ------------ ------------ ------------ Comprehensive income $77.5 $115.9 $155.1 $155.5 ============ ============ ============ ============ See accompanying notes.
6 OLD REPUBLIC INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ($ in Millions) - --------------------------------------------------------------------------------------------- Six Months Ended June 30, --------------------------- 1998 1997 ------------ ------------ Cash flows from operating activities: Net income $161.9 $153.5 Adjustment to reconcile net income to net cash provided by operating activities: Deferred policy acquisition costs (4.3) (1.8) Premiums and other receivables 2.2 (0.1) Unpaid claims and related items (34.7) 22.5 Future policy benefits and policyholders' funds (17.7) (28.0) Income taxes 37.8 30.9 Reinsurance balances and funds (0.2) (9.1) Accounts payable, accrued expenses and other 1.0 (15.3) ------------ ------------ Total 145.9 152.4 ------------ ------------ Cash flows from investing activities: Sales of fixed maturity securities: Held to maturity: Maturities and early calls 83.7 71.9 Available for sale: Maturities and early calls 60.1 87.4 Other 77.0 44.9 Sales of equity securities 10.8 16.8 Sales of other investments 2.5 11.3 Sales of fixed assets for company use 0.5 1.6 Purchases of fixed maturity securities: Held to maturity (175.6) (146.5) Available for sale (147.6) (185.8) Purchases of equity securities (51.0) (3.8) Purchases of other investments (10.8) (1.7) Purchases of fixed assets for company use (14.4) (5.7) Purchases of investment in subsidiaries (1.9) --- Other-net (0.2) (2.1) ------------ ------------ Total (166.7) (111.6) ------------ ------------ Cash flows from financing activities: Increase in term loans 4.0 10.0 Issuance of preferred and common stocks 14.5 3.9 Issuance of debentures and notes 0.6 116.8 Repayments of term loans --- (42.0) Redemption of debentures and notes (0.7) (0.8) Dividends on common shares (25.7) (20.8) Dividends on preferred shares (0.1) (1.4) Purchase of treasury stock (51.4) (20.8) Other-net 1.4 1.7 ------------ ------------ Total (57.3) 46.4 ------------ ------------ Increase (decrease) in cash and short-term investments (78.1) 87.2 Cash and short-term investments, beginning of period 355.0 301.0 ------------ ------------ Cash and short-term investments, end of period $276.8 $388.2 ============ ============ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $4.9 $4.1 ============ ============ Income taxes $37.9 $31.1 ============ ============ See accompanying notes.
7 OLD REPUBLIC INTERNATIONAL CORPORATION NOTES TO CONSOLIDATED SUMMARY FINANCIAL STATEMENTS (Unaudited) ($ in Millions, Except Share Data) - ------------------------------------------------------------------------------- 1. Accounting Policies and Basis of Presentation: - ------------------------------------------------- The accompanying consolidated summary financial statements have been prepared in conformity with generally accepted accounting principles as described in the Corporation's latest annual report to shareholders or as disclosed herein. The financial accounting and reporting process relies on estimates and on the exercise of judgement, but in the opinion of management all adjustments, consisting of normal recurring accruals, necessary to a fair presentation of the accompanying statements have been reflected therein. Realized gains or losses on dispositions of investment securities have been reflected in the operating results for each period presented. 2. Common Share Data: - --------------------- Common share data has been retroactively adjusted to reflect a 50% stock dividend of the Company's common shares approved by the Board of Directors on March 12, 1998. The following table provides a reconciliation of the income before extraordinary items and number of shares used in basic and diluted earnings per share calculations. Quarters Ended Six Months Ended June 30, June 30, ------------------------- ------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Numerator: Income before extraordinary item......................... $ 80.4 $ 88.3 $ 161.9 $ 153.5 Less Preferred stock dividends........................... -- .6 .1 1.4 ------------ ------------ ------------ ------------ Numerator for basic earnings per share - income available to common stockholders................ 80.3 87.6 161.8 152.1 Effect of dilutive securities: Convertible preferred stock dividends.................. -- .6 .1 1.4 ------------ ------------ ------------ ------------ Numerator for diluted earnings per share - income available to common stockholders after assumed conversions................................ $ 80.4 $ 88.3 $ 161.9 $ 153.5 ============ ============ ============ ============ Denominator: Denominator for basic earnings per share - weighted-average shares................................ 137,756,505 130,383,032 138,261,741 130,392,387 Effect of dilutive securities: Stock options .................................. 1,999,091 1,569,534 1,935,647 1,470,410 Convertible preferred stock............................ 238,017 9,541,441 238,017 9,926,446 ------------ ------------ ------------ ------------ Dilutive potential common shares....................... 2,237,108 11,110,975 2,173,664 11,396,856 ------------ ------------ ------------ ------------ Denominator for diluted earnings per share - adjusted weighted-average shares and assumed conversions ................................. 139,993,613 141,494,007 140,435,405 141,789,243 ============ ============ ============ ============ Basic earnings per share ................................ $ .58 $ .67 $ 1.17 $ 1.17 ============ ============ ============ ============ Diluted earnings per share................................ $ .57 $ .62 $ 1.15 $ 1.08 ============ ============ ============ ============
3. Unrealized Appreciation of Investments: - ------------------------------------------- Cumulative net unrealized gains on fixed maturity securities available for sale and equity securities credited to a separate account in common shareholders' equity amounted to $66.3 at June 30, 1998. Unrealized appreciation of investments, before applicable income taxes of $36.2, at June 30, 1998 included gross unrealized gains and (losses) of $108.8 and $(6.2), respectively. For the six months ended June 30, 1998 and 1997, net unrealized depreciation of investments, net of deferred income taxes, amounted to $6.0 and $.5, respectively. 8 OLD REPUBLIC INTERNATIONAL CORPORATION MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS Six Months Ended June 30, 1998 and 1997 - ------------------------------------------------------------------------------- OVERVIEW This analysis pertains to the consolidated accounts of Old Republic International Corporation. The Company conducts its business through four major segments, namely its General (property and liability coverages), Mortgage Guaranty, Title, and Life insurance groups. FINANCIAL POSITION Old Republic's financial position at June 30, 1998 reflected an increase in assets of 0.5%, a decrease in liabilities of 1.3%, and an increase in common shareholders' equity of 4.4% when compared to the immediately preceding year-end. Cash and invested assets represented 70.1% and 69.6% of consolidated assets as of June 30, 1998 and December 31, 1997, respectively. Relatively high short-term maturity investment positions continued to be maintained as of June 30, 1998 to provide necessary liquidity for specific operating needs and to enhance flexibility in investment strategy. Changes in short-term investments reflect a large variety of seasonal and intermediate-term factors including seasonal operating cash needs, investment strategy, and expectations as to trends in interest yields. Accordingly, the future level of short-term investments will vary and respond to the dynamics of these factors and may, as a result, increase or decrease from current levels. During the first six months of 1998, the Corporation committed substantially all investable funds in short to intermediate-term fixed maturity securities. Old Republic continues to adhere to its long-term policy of investing primarily in investment grade, marketable securities; the Corporation has not directed its investable funds to so-called "junk bonds" or derivative types of securities. During the first six months of 1998, Old Republic's commitment to equity securities increased by 23.6% vis-a-vis the related invested balance at year-end 1997 as a result of unrealized gains and greater purchases during the first half of 1998. As of June 30, 1998, the carrying value of fixed maturity securities in default as to principal or interest was immaterial in relation to consolidated assets or shareholders' equity. Consolidated operations produced positive cash flows in this year's first half. The parent holding company has met its liquidity and capital needs principally through dividends paid by its subsidiaries. The insurance subsidiaries' ability to pay cash dividends to the parent company is generally restricted by law or subject to approval of the insurance regulatory authorities of the states in which they are domiciled. Additionally, the terms of guarantees by the Company of bank loans to the trustee of the Company's Employees Savings and Stock Ownership Plan restrict the amount of debt the Company may incur. This covenant is being met. Old Republic's capitalization of $2.39 billion at June 30, 1998 consisted of debt and debt equivalents of $146.0 million, convertible preferred stock of $1.0 million, and common shareholders' equity of $2.24 billion. The increase in the common shareholders' equity account during the six months ended June 30, 1998 reflects primarily the retention of earnings in excess of dividends declared on outstanding preferred and common shares offset to some degree by the reacquisition of $51.4 million worth of common shares pursuant to a previously announced plan. Common share data has been adjusted retroactively to reflect a 50% stock dividend treated as a 3 for 2 split of the Company's common shares approved by the Board of Directors on March 12, 1998 and issued on May 4, 1998 to shareholders of record on April 10, 1998. RESULTS OF OPERATIONS Revenues: Consolidated net premiums and fees earned in the first half of 1998 amounted to $864.5 million and were 10.8% above the amount reported for the first half of 1997. For the second quarter of 1998, consolidated net premiums and fees earned amounted to $455.0 million, 13.0% above the amount reported for the second quarter of 1997. For the second quarter of 1998, the Company's General Insurance Group posted relatively flat earned premiums growth to $227.7 million due to the continuation of a soft pricing environment. Premium growth in the Mortgage Guaranty Group was enhanced by a rise in the amount of renewal business and market expansion; earned premiums increased by 9.3 % to $72.7 million from $66.5 million in the year-ago quarter. Title Group premium and fee revenues increased 44.8% to $141.5 million in the second quarter of 1998 when compared to the same quarter of 1997. The Mortgage Guaranty Group and the Title Group benefitted from low interest rates and high employment trends, as well as moderately greater appreciation of home prices. The Life and Health Group's premium volume increased to $13.0 million, a 21.2% increase when compared to the same quarter of 1997. 9 The General Insurance Group's net premiums earned decreased 1.1% to $436.7 million in the first half of 1998. The Mortgage Guaranty Group continued to experience volume growth and reported net premiums earned of $144.1 million, an increase of 9.7%. The Title Insurance Group reported premiums and fees in the first half of $255.4 million, up from $181.5 million in the year-ago period. Life and health premiums also rose 10.0% to $28.2 million during the same 1998 period, but remained at approximately 3% of consolidated premiums and fees. Consolidated net investment income was $136.5 million in the first half of 1998 and $67.9 million in the second quarter of 1998 compared to $133.6 million and $65.9 million, respectively in the same quarter and six month periods of 1997. This revenue source was affected by positive consolidated operating cash flows and by a concentration of investable assets in interest-bearing, fixed maturity securities. The average annualized yield on investments was approximately 5.8% and 5.9% at the end of June 30, 1998 and 1997, respectively. This yield pattern reflects at once the relatively short maturity of Old Republic's fixed maturity securities portfolio, changes in interest rates at various times and the commitment of a larger percentage of investable funds to tax-exempt fixed maturity securities that typically bear lower current yields. The Company's investment policies have not been designed to maximize realized investment gains. Realized gains of $25.5 million in the first half of 1998 were mostly due to the sale of equity securities. In addition to scheduled maturities, dispositions of securities have been caused principally by calls prior to maturity by issuers of bonds and notes and by sales of equity securities. For the first six months of 1998, 65.1% of total dispositions represented maturities and early calls of existing holdings; for the year 1997 these transactions amounted to 76.9% of the total dispositions. Expenses: Consolidated benefit, claim and settlement costs, as a percentage of net premiums and fees earned, were approximately 43% and 49% in the first six months of 1998 and 1997, respectively. For the second quarter of each year, these ratios were 42% in 1998 and 48% in 1997. Consolidated claims experience for property and liability coverages was basically stable in both periods. Mortgage Guaranty claim costs were lower during the second quarter and first half of 1998 compared to the same periods in 1997 due to a reduction in expected claims. Title and Life Group claim costs were stable in the latest quarterly and six month periods. The ratio of consolidated underwriting, acquisition and insurance expenses to net premiums and fees earned were 50% and 45% in the first six months of 1998 and 1997, respectively. These ratios were 51% and 44% for the second quarters of 1998 and 1997, respectively. Variations in these percentages between comparative periods typically reflect changing patterns in the mix of business and the varying production costs pertaining thereto. The higher ratios in 1998 periods reflected the significance of title insurance volume which carries greater production costs, a rise in mortgage guaranty sales expenses resulting from higher net costs for providing contract underwriting services, and a relatively higher expense ratio for property and liability insurance due to flat premium production trends. The Company and its subsidiaries have been aware for several years of issues associated with the inadequacy of programming codes in existing computer systems for the years 2000 and beyond. The Company's subsidiaries are scheduled to complete by December 31, 1998, the identification and implementation of changes, and the testing of systems affected by this year 2000 issue. The costs of identifying, implementing, and testing the required changes has not been material to historical operating results. A significant portion of these costs was not incremental as the Company and its subsidiaries have mostly utilized existing resources. Pre-Tax and Net Income: Income before taxes decreased by 4.1% in the second quarter and increased by 5.2% in the first six months of 1998 when compared to the same periods one year ago. Excluding the effects of the non-recurring tax-related items recorded in the second quarter of 1997, income before taxes increased by 7.7% and 12.4% in the second quarter and first six months of 1998 when compared to the same periods in 1997. The Corporation's Mortgage Guaranty and Title insurance segments reflected higher pre-tax operating earnings; the General insurance segment posted a decrease in pre-tax operating earnings due mainly to poorer underwriting results; and Life insurance earnings were basically flat. The effective consolidated income tax rate, excluding the effects of the non-recurring items, was 31% and 32%, in the second quarter and six month period of 1998, respectively, and 32% in the second quarter and six month period of 1997, respectively. The rates for each period reflect primarily the varying proportions of pre-tax operating income derived from tax-sheltered investment income (principally tax-exempt interest) on the one hand, and fully taxable investment and underwriting/service income on the other hand. 10 OTHER INFORMATION Historical data pertaining to the operating results, liquidity, and other financial matters applicable to an insurance enterprise such as Old Republic are not necessarily indicative of results to be achieved in succeeding years. In addition to the factors cited in the next paragraph, the long-term nature of the insurance business, seasonal and annual patterns in premium production and incidence of claims, changes in yields obtained on invested assets, changes in government policies and free markets affecting inflation rates and general economic conditions, and changes in legal precedents or the application of law affecting the settlement of disputed claims all have a bearing on period-to-period comparisons and future operating results. Any forward-looking statements contained in this report, of necessity involve assumptions, uncertainties, and risks that may affect the Company's future performance. With regard to Old Republic's General insurance segment, its results can be affected in particular by the level of market competition which is typically a function of available capital and expected returns on such capital among competitors, the levels of interest and inflation rates, and periodic changes in claim frequency and severity patterns caused by natural disasters, weather conditions, accidents, illnesses and work-related injuries. Mortgage Guaranty and Title insurance results can be affected by such factors as changes in national and regional housing demand and values, the availability and cost of mortgage loans, employment trends, and default rates on mortgage loans; mortgage guaranty results may also be affected by various risk-sharing arrangements with business producers. Life and disability insurance results can be impacted by the levels of employment and consumer spending, as well as mortality and health trends. At the holding company level, results are generally affected by the amount of debt outstanding and its cost. Any forward-looking statements speak only as of their dates. Old Republic undertakes no obligation to publicly update or revise such statements, whether as a result of new information, future events or otherwise, and accordingly they may not be unduly relied upon. 11 OLD REPUBLIC INTERNATIONAL CORPORATION FORM 10-Q PART II - OTHER INFORMATION - ------------------------------------------------------------------------------- Item 4 - Submission of Matters to a Vote of Security Holders (a) The annual meeting of registrant's shareholders was held on May 22, 1998. (b) Proxies for the meeting were solicited by management pursuant to Regulation 14A under the Security Exchange Act of 1934. There was no solicitation in opposition to management's nominees for directors as listed in the proxy statement and all such nominees were elected. (c) At the meeting, the shareholders voted on the following matters: 1. The election of four Class II directors. There were at least 85,076,363 affirmative votes for each director and no more than 1,383,681 votes withheld. 2. An amendment to the registrant's Certificate of Incorporation to increase the number of authorized shares of Common Stock to 500,000,000 was considered. There were 80,546,408 shares that voted for this amendment; 5,538,488 shares that voted against this amendment and 375,148 shares that abstained from voting. As a result, this amendment was approved. 3. An amendment to the registrant's Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock to 100,000,000 was considered. There were 60,021,171 shares that voted for this amendment; 25,896,592 shares that voted against this amendment and 542,281 shares that abstained from voting. As a result, this amendment was approved. 4. An amendment to the registrant's Certificate of Incorporation to remove the present restriction of one vote per share on the registrant's Preferred Stock was considered. There were 40,664,882 shares that voted for this amendment; 38,067,621 shares that voted against this amendment; 593,053 shares that abstained from voting and 7,134,488 shares that were broker non-votes. As a result, this amendment failed to be approved. Item 6 - Reports on Form 8-K (a) Reports on Form 8-K 1. The registrant has not filed any reports on Form 8-K during the quarter for which this report is filed. Items other than those listed are omitted because they are not required. 12 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Old Republic International Corporation -------------------------------------- (Registrant) Date: August 13, 1998 ------------------ /s/ Paul D. Adams -------------------------------------- P. D. Adams Senior Vice President & Chief Financial Officer EX-27 2 FDS
7 This schedule contains summary financial information extracted from Old Republic International's consolidated balance sheet and consolidated statement of income and is qualified in its entirety by reference to such financial statements. 1,000,000 6-MOS DEC-31-1998 JUN-30-1998 2,020 2,341 2,397 144 7 0 4,781 25 24 131 6,959 3,645 359 0 57 146 0 1 155 2,092 6,959 751 136 25 129 374 105 320 235 74 161 0 0 0 161 1.17 1.15 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----