EX-99.1 2 ex991.htm EXHIBIT 99.1 EARNINGS PRESS RELEASE DATED OCTOBER 22, 2009 ex991.htm
NEWS BULLETIN
 
 
For Further Information:
 
AT OLD REPUBLIC:
AT FINANCIAL RELATIONS BOARD:
A.C. Zucaro
Leslie Loyet
  
Chairman & CEO
Analysts/Investors
    
(312) 346-8100
(312) 640-6672
    
 
lloyet@mww.com
    
 
  
 
  
   
FOR IMMEDIATE RELEASE
NYSE:  ORI
THURSDAY, OCTOBER 22, 2009
  
 
OLD REPUBLIC REPORTS THIRD QUARTER AND FIRST NINE MONTHS 2009 RESULTS
 
 

CHICAGO – October 22, 2009 – Old Republic International Corporation (NYSE: ORI), today reported the following results for the third quarter and first nine months of 2009:
Financial Highlights
(Millions, except per share data and percentages in all tables)
     
   
Quarters Ended September 30,
    
Nine Months Ended September 30,
  
   
2009
  
2008
  
Change
    
2009
  
2008
  
Change
  
 
Operating Revenues
$
958.6
  
$
936.3 
 
2.4
%
    
$
2,749.4
  
$
2,824.5 
 
-2.7
%
  
 
Net Operating Income (Loss)
  
(66.1)
    
(45.3) 
  
-45.8
        
(169.6)
    
(114.9) 
 
-47.6
    
 
Net Income (Loss)
$
(46.2)
  
$
(48.0) 
 
3.7
%
    
$
(116.0)
  
$
(431.8) 
 
73.1
%
  
 
Diluted Earnings Per Share:
                                      
 
Net Operating Income (Loss)
$
(0.28)
  
$
(0.20) 
 
-40.0
%
    
$
(0.72)
  
$
(0.50) 
 
-44.0
%
  
 
Net Income (Loss)
$
(0.20)
  
$
(0.21) 
 
4.8
%
    
$
(0.49)
  
$
(1.87) 
 
73.8
%
  
                                         
 
Cash Dividends Per Share
$
0.17
  
$
0.17 
 
-
%
    
$
0.51
  
$
0.50 
 
2.0
%
  
 
Ending Book Value Per Share
                    
$
16.54
  
$
16.96 
 
-2.5
%
  
                             
                             
Old Republic’s year-over-year operating results, which exclude net realized investment gains or losses, worsened in this year’s third quarter and first nine months. Results for 2009 reflected slightly higher loss costs in Old Republic’s mortgage guaranty line but benefited from much greater market share-driven revenues and a lower expense ratio in the title insurance segment. General insurance operating results throughout 2009 were dampened by the combination of lower earned premiums and higher loss costs for certain insurance coverages.

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The net loss for the latest quarter and this year’s first nine months was reduced by deferred income tax credits of $20.5 million ($0.08 per share) and $54.0 million ($0.23 per share), respectively. The tax credits, which could not be recognized previously due to the requirements of accounting rules, stem from estimates of losses from other-than-temporary impairments of investments, most of which were originally recorded in the second quarter of 2008.

Consolidated Results – The major components of Old Republic’s consolidated results and other data for the periods reported upon are shown below:
 
 
Quarters Ended September 30,
  
Nine Months Ended September 30,
 
2009
  
2008
  
Change
  
2009
  
2008
  
Change
Operating revenues:
                                  
General insurance
$
514.4
  
$
565.7
  
-9.1
%
  
$
1,545.2
  
$
1,708.7
  
-9.6
%
Mortgage guaranty
  
164.6
    
172.8
  
-4.7
      
502.4
    
518.9
  
-3.2
  
Title insurance
  
259.7
    
174.7
  
48.7
      
639.0
    
521.2
  
22.6
  
Corporate and other
  
19.8
    
23.0
  
-13.9
      
62.6
    
75.6
  
-17.2
  
Total
$
958.6
  
$
936.3
  
2.4
%
  
$
2,749.4
  
$
2,824.5
  
-2.7
%
Pretax operating income (loss):
                                  
General insurance
$
43.7
  
$
77.0
  
-43.3
%
  
$
148.4
  
$
223.2
  
-33.5
%
Mortgage guaranty
  
(160.4)
    
(152.8)
  
-4.9
      
(443.0)
    
(415.9)
  
-6.5
  
Title insurance
  
4.0
    
(9.7)
  
142.0
      
0.6
    
(27.0)
  
102.4
  
Corporate and other
  
1.8
    
5.3
  
-65.7
      
4.3
    
11.4
  
-62.2
  
Sub-total
  
(110.7)
    
(80.1)
  
-38.2
      
(289.6)
    
(208.3)
  
-39.0
  
Realized investment gains (losses):
                                  
From sales
  
0.6
    
18.3
          
1.0
    
26.0
      
From impairments
  
(1.5)
    
(11.5)
          
(1.5)
    
(448.9)
      
   Net realized investment
                                  
   gains (losses)
  
(0.9)
    
6.7
  
N/M
      
(0.5)
    
(422.8)
  
N/M
  
Consolidated pretax income (loss)
  
(111.7)
    
(73.4)
  
-52.2
      
(290.2)
    
(631.1)
  
54.0
  
Income taxes (credits)
  
(65.4)
    
(25.3)
  
-158.0
      
(174.1)
    
(199.3)
  
12.6
  
Net income (loss)
$
(46.2)
  
$
(48.0)
  
3.7
%
  
$
(116.0)
  
$
(431.8)
  
73.1
%

Consolidated underwriting ratio:
                                  
Benefits and claim ratio
78.4
%
  
81.8
%
        
80.3
%
  
80.1
%
      
Expense ratio
44.4
    
38.8
          
42.2
    
39.0
        
Composite ratio
122.8
%
  
120.6
%
        
122.5
%
  
119.1
%
      

Components of diluted
                                  
earnings per share:
                                  
Net operating income (loss)
$
(0.28)
  
$
(0.20)
  
-40.0
%
  
$
(0.72)
  
$
(0.50)
  
-44.0
%
Net realized investment
                                  
gains (losses)
  
0.08
    
(0.01)
  
N/M
      
0.23
    
(1.37)
  
N/M
  
Net income (loss)
$
(0.20)
  
$
(0.21)
  
4.8
%
  
$
(0.49)
  
$
(1.87)
  
73.8
%
                                   
Cash dividends paid per share
$
0.17
  
$
0.17
  
-
%
  
$
0.51
  
$
0.50
  
2.0
%
                                   

N/M: Not meaningful

The above table shows both operating and net income (loss) to highlight the effects of realized investment gain or loss recognition and any non-recurring items on period-to-period comparisons. Operating income, however, does not replace net income computed in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) as a measure of total profitability.
 
 
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The recognition of realized investment gains or losses can be highly discretionary and arbitrary due to such factors as the timing of individual securities sales, recognition of estimated losses from write-downs for impaired securities, tax-planning considerations, and changes in investment management judgments relative to the direction of securities markets or the future prospects of individual investees or industry sectors. Likewise, non-recurring items which may emerge from time to time can distort the comparability of the Company’s results from period to period. Accordingly, management uses net operating income, a non-ASC financial measure, to evaluate and better explain operating performance, and believes its use enhances an understanding of Old Republic’s basic business results.

General Insurance Results – Pretax operating earnings for this year’s quarterly and year-to-date periods were affected mostly by reduced premium volume and moderately higher claim and expense ratios. The following table shows these effects:
 
 
General Insurance Group
 
Quarters Ended September 30,
  
Nine Months Ended September 30,
 
2009
  
2008
  
Change
  
2009
  
2008
  
Change
Net premiums earned
$
446.7
  
$
500.3
  
-10.7
%
  
$
1,344.9
  
$
1,507.4
  
-10.8
%
Net investment income
  
64.7
    
61.9
  
4.5
      
191.8
    
189.1
  
1.4
  
Pretax operating income (loss)
$ 
43.7
  
$
77.0
  
-43.3
%
  
$ 
    148.4
  
$
223.2
  
-33.5
%

Claim ratio
77.5
%
  
72.5
%
      
76.1
%
  
72.8
%
    
Expense ratio
25.8
    
23.8
        
26.0
    
24.2
      
Composite ratio
103.3
%
  
96.3
%
      
102.1
%
  
97.0
%
    


Earned premiums for the large majority of insurance coverages continued to trend lower throughout 2009. As in the recent past, premium growth has been constrained by the combination of a moderately declining rate environment during the past three years or so, and by recessionary economic conditions. These conditions affect such factors as sales and employment levels, both of which are important bases upon which premium rates are applied.

General insurance investment income trends benefited from a greater invested asset base.

Overall claim ratios continued to trend moderately higher in this year’s third quarter and first nine months. 2009 claim experience for the consumer credit indemnity (“CCI”) coverage, however, remained at high levels, adding approximately 7.2 percentage points to the above claim ratios. By contrast CCI claim experience in the third quarter and first nine months of 2008 was additive to general insurance claim ratios by 5.1 and 6.8 percentage points, respectively. Aggregate claim experience for other coverages did not show significantly adverse trends. Production and general operating expenses edged down slightly in 2009 but nonetheless resulted in a higher ratio as the expense reduction lagged a larger drop in earned premiums.

Mortgage Guaranty Results – Year-to-date mortgage guaranty operating results benefited from lower production and operating expenses, but were hindered by moderately higher claim costs during 2009. Key indicators of this segment’s evolving performance are shown in the following table:

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Mortgage Guaranty Group
 
Quarters Ended September 30,
  
Nine Months Ended September 30,
 
2009
  
2008
  
Change
  
2009
  
2008
  
Change
Net premiums earned
$
138.9
  
$
148.4
  
-6.4
%
  
$
425.8
  
$
445.2
  
-4.3
%
Net investment income
  
23.8
    
22.0
  
8.4
      
68.4
    
65.0
  
5.4
  
Pretax operating income (loss)
$ 
(160.4)
  
$
(152.8)
  
-4.9
%
  
$ 
(443.0)
  
$
(415.9)
  
-6.5
%

Claim ratio
214.0
%
  
203.1
%
      
203.8
%
  
192.3
%
    
Expense ratio
17.3
    
14.8
        
15.1
    
15.8
      
Composite ratio
231.3
%
  
217.9
%
      
218.9
%
  
208.1
%
    

Mortgage guaranty earned premiums declined in each of this year’s quarterly periods. The lower premium levels resulted mostly from the more selective underwriting criteria applied since late 2007, from an overall decline in the industry’s business penetration, and from higher premium refunds related to claim rescissions. These factors were attenuated somewhat by rising persistency of business produced in prior years, and by a continuing decline in premiums ceded to lender-owned (captive) reinsurance companies. During this year’s third quarter, the Mortgage Guaranty Group recaptured business previously ceded to several captives.  In substance, the transactions are cut-off reinsurance arrangements whereby the captives have remitted to the Company the reserves on existing claim obligations and a risk premium for claims that will occur after the recapture date.  Accordingly, the Company recorded proceeds of $148.9 million and established a combination of claims reserves ($68.4 million) and premium reserves ($82.5 million) all of which resulted in little consequential effect on the pretax loss for the quarter or first nine months of 2009.

Mortgage guaranty investment income trends benefited from a greater invested asset base.

Claim ratios were up slightly year-over-year in both the third quarter and first nine months of 2009. Greater claim rescissions and a moderate decline in claim severity offset to some degree the impact on claim reserve provisions of a continuing uptrend in delinquent loans. The components of incurred mortgage guaranty claim ratios are shown in the following table. The recording of the above noted reinsurance recaptures had the effect of decreasing the paid claims ratios by 49.3 and 16.1 percentage points in this year’s third quarter and first nine months, respectively, and increasing the claim reserve provisions ratios by identical amounts.

 
Mortgage Guaranty Group
 
Quarters Ended
  
Nine Months Ended
 
September 30,
  
September 30,
 
2009
  
2008
  
2009
  
2008
Incurred claim ratio from:
                      
Paid claims
57.8
%
  
84.7
%
  
92.5
%
  
66.6
%
Claim reserve provisions
156.2
    
118.4
    
111.3
    
125.7
  
Total
214.0
%
  
203.1
%
  
203.8
%
  
192.3
%


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Title Insurance Results – Old Republic’s title insurance business registered slightly better than break even results for the first nine months of 2009. Key operating performance indicators are shown in the following table:
 
 
Title Insurance Group
 
Quarters Ended September 30,
  
Nine Months Ended September 30,
 
2009
  
2008
  
Change
  
2009
  
2008
  
Change
Net premiums and fees earned
$
253.3
  
$
168.4
  
50.4
%
  
$
620.6
  
$
502.1
  
23.6
%
Net investment income
  
6.3
    
6.2
  
1.4
      
18.2
    
19.1
  
-4.3
  
Pretax operating income (loss)
$ 
4.0
  
$
(9.7)
  
142.0
%
  
$ 
.6
  
$
(27.0)
  
102.4
%

Claim ratio
8.3
%
  
7.0
%
      
7.6
%
  
7.0
%
    
Expense ratio
91.1
    
102.2
        
94.4
    
102.0
      
Composite ratio
99.4
%
  
109.2
%
      
102.0
%
  
109.0
%
    

Growth in title premiums and fees for 2009 periods resulted from greater refinance transactions earlier this year and from the benefit of market share gains emerging from title industry dislocations and consolidations. Claim costs rose at a quicker pace, however, as the Company added moderately to reserve provisions to address recent claim emergence trends. Production and general operating expenses, while relatively lower as a percentage of premium and fees revenues, rose dollar-wise in reflection of greater personnel and other production costs related to the higher revenues attained and anticipated.

Corporate and Other Operations – The Company’s small life and health insurance business and the net costs associated with the parent holding company and internal services subsidiaries produced a much lower gain in this year’s first nine months. Period-to-period variations in the results of these relatively minor elements of Old Republic’s operations usually stem from the volatility inherent to the small scale of its life and health business, fluctuations in the costs of external debt, and net interest on intra-system financing arrangements. A portion of the year-over-year decline in earnings was also due to foreign exchange adjustments for U.S. dollar conversions from the Canadian currency held by a life and health insurance subsidiary.

Cash, Invested Assets, and Shareholders’ Equity – The following table reflects Old Republic’s consolidated cash and invested assets as well as shareholders’ equity at the dates shown:
               
% Change
   
September
  
December
  
September
  
Sept '09/
  
Sept '09/
   
2009
  
2008
  
2008
  
Dec '08
  
Sept '08
Cash and invested assets:  fair value basis
  
$
9,844.3
  
$
8,855.1
  
$
8,733.7
  
11.2
%
  
12.7
%
                                                original cost basis
  
$
9,635.0
  
$
9,210.0
  
$
9,143.3
  
4.6
%
  
5.4
%
                               
Shareholders’ equity:          Total
  
$
3,901.3
  
$
3,740.3
  
$
3,914.3
  
4.3
%
  
-0.3
%
Per common share
  
$
16.54
  
$
15.91
  
$
16.96
  
4.0
%
  
-2.5
%
                               
Composition of shareholders’ equity per share:
                              
Equity before items below
  
$
15.09
  
$
16.10
  
$
16.96
  
-6.3
%
  
-11.0
%
Unrealized investment gains (losses) and other
                              
accumulated comprehensive income (loss)
    
1.45
    
(0.19)
    
-
            
Total
  
$
16.54
  
$
15.91
  
$
16.96
  
4.0
%
  
-2.5
%

Consolidated cash flow from operating activities amounted to $438.0 million for the first nine months of 2009 versus $467.6 million for the same period in 2008.
 
 

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The investment portfolio reflects a current allocation of approximately 85 percent to fixed-maturity securities and 5 percent to equities. As has been the case for many years, Old Republic’s invested assets are managed in consideration of enterprise-wide risk management objectives intended to assure solid funding of its subsidiaries’ long-term obligations to insurance policyholders and other beneficiaries, and evaluations of their long-term effect on the stability of capital accounts. The portfolio contains little or no direct insurance risk-correlated asset exposures to real estate, mortgage-backed securities, collateralized debt obligations (“CDO’s”), derivatives, junk bonds, hybrid securities, or illiquid private equity investments. In a similar vein, the Company does not engage in hedging or securities lending transactions, nor does it invest in securities whose values are predicated on non-regulated financial instruments exhibiting amorphous or unfunded counter-party risk attributes.

Substantially all changes in the shareholders’ equity account reflect the Company’s net income or loss, dividend payments to shareholders, and impairments or changes in market valuations of invested assets during the periods shown below:
 
   
Shareholders’ Equity Per Share
   
Quarter
  
Nine Months
   
Ended
  
Ended
   
September 30,
  
September 30,
   
2009
  
2009
  
2008
Beginning balance
  
$
15.93
  
$
15.91
  
$
19.71
Changes in shareholders’ equity:
                  
Net operating income (loss)
    
(0.28)
    
(0.72)
    
(0.50)
Net realized investment gains (losses):
                  
From sales
    
-
    
-
    
0.07
From impairments
    
0.08
    
0.23
    
(1.44)
Subtotal
    
0.08
    
0.23
    
(1.37)
Net unrealized investment gains (losses)
    
0.95
    
1.56
    
(0.37)
Total realized and unrealized investment gains (losses)
    
1.03
    
1.79
    
(1.74)
Cash dividends
    
(0.17)
    
(0.51)
    
(0.50)
Stock issuance, foreign exchange, and other transactions
    
0.03
    
0.07
    
(0.01)
Net change
    
0.61
    
0.63
    
(2.75)
Ending balance
  
$
16.54
  
$
16.54
  
$
16.96

Old Republic’s significant investments in the stocks of two leading publicly held mortgage guaranty (“MI”) businesses (MGIC Investment Corp. and The PMI Group) account for a substantial portion of the 2008 realized and unrealized investment losses shown in the above and following tables. Unrealized losses, including losses on securities categorized as other-than-temporarily impaired (“OTTI”), represent the net difference between the most recently established cost and the fair values of the investments at each point in time. The aggregate original and impaired costs, fair value, and latest reported underlying equity values of the aforementioned two mortgage guaranty investments are shown below.
   
September 30,
  
December 31,
   
2009
  
2008
  
2007
Total value of the two MI investments:
Original cost
$
416.4
  
$
416.4
  
$
429.7
 
Impaired cost
  
106.8
    
106.8
    
N/A
 
Fair value
  
177.0
    
82.7
    
375.1
 
Underlying equity(*)
$
354.7
  
$
515.9
  
$
679.7
                     
(*) Underlying equity based on latest reports (which may lag by one quarter) issued by investees.


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When making investment decisions, management considers the Company’s ability to retain its holdings for a period sufficient to recover their cost and to obtain a competitive long-term total return. It also considers such factors as balance sheet effects of potential changes in market valuations, asset-liability matching objectives, long term ability to hold securities, tax planning considerations, and the investees’ reported book values and ability to continue as going concerns. The above-noted mortgage guaranty holdings were acquired as passive long-term investment additions for a core segment of Old Republic’s business in anticipation of a recovery for the MI industry in 2010. In management’s judgment, the currently depressed market valuations of companies operating in the housing and mortgage-lending sectors of the American economy have been impacted significantly by the cyclical and macroeconomic conditions affecting these sectors, and by the recent dysfunctionality of the banking and mortgage lending industries.

For external financial reporting purposes, however, Old Republic uses relatively short time frames in recognizing OTTI adjustments in its income statement. In this context, absent issuer-specific circumstances that would result in a contrary conclusion, all unrealized investment losses pertaining to any equity security reflecting a 20 percent or greater decline for a six month period is considered OTTI. Unrealized losses that are deemed temporary and all unrealized gains are recorded directly as a separate component of the shareholders’ equity account and in the consolidated statement of comprehensive income. As a result of accounting idiosyncrasies, however, OTTI losses recorded in the income statement of one period can not be offset in the income statement of a subsequent period by fair value gains on the previously impaired securities unless the gains are realized through actual sales. Such unrealized fair value gains can only be recognized through direct credits in the shareholders’ equity account and in the consolidated statement of comprehensive income.

Recent Capital Raise -   Early in this year’s second quarter the Company obtained gross proceeds of $316.25 million through a public offering of 8% convertible Senior Notes due in 2012. The funds were used mostly to enhance the capital base of the general and title insurance segments, and to repay a portion of commercial paper debt previously incurred to strengthen the capital of the mortgage guaranty segment as of year end 2008. Along with the growth oriented capital additions to businesses with good prospects for the long term, the new funds enhance the stability and resiliency of Old Republic’s consolidated capitalization.

Conference Call Information
Old Republic has scheduled a conference call at 3:00 p.m. EDT (2:00 p.m. CDT) today, to discuss its third quarter 2009 performance and to review major operating trends and business developments. To access this call, please log on to www.oldrepublic.com 15 minutes before the call to download the necessary software.

Investors may access a replay of the call by dialing 888-203-1112, passcode 7542817, which will be available through October 29, 2009. The replay will also be available on Old Republic International’s website through November 22, 2009.
 
 
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About Old Republic
Chicago-based Old Republic International Corporation is an insurance holding company whose subsidiaries market, underwrite and provide risk management services for a wide variety of coverages primarily in the property & liability, mortgage guaranty, and title insurance fields. One of the nation’s 50 largest publicly owned insurance organizations, Old Republic has assets of approximately $14.30 billion and shareholders’ equity of $3.90 billion or $16.54 per share. Its current stock market valuation is approximately $2.7 billion, or $11.46 per share.

The nature of Old Republic’s business requires that it be managed for the long run. For the 25 years ended in 2008, the Company’s total market return, with dividends reinvested, has grown at a compounded annual rate of 9.6 percent per share. For the same period, the total market return, with dividends reinvested, for the S&P 500 Index has grown at a 9.8 percent annual compound rate. During those years, Old Republic’s shareholders’ equity account, inclusive of cash dividends, has risen at an average annual rate of 12.1 percent per share, and the regular cash dividend has grown at a 10.3 percent annual compound rate. According to the most recent edition of Mergent’s Dividend Achievers, Old Republic is one of just 120 companies, out of 10,000-plus publicly held corporations, that have posted at least 25 consecutive years of annual dividend growth.

     
     
Accompanying Financial Data:
·  
Summary Financial Statements and Common Stock Statistics
·  
Segmented Operating Summary
·  
Segmented Operating Statistics
·  
Notes and Safe Harbor Statement

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Old Republic International Corporation
Financial Summary (Unaudited)
            
   
September 30,
  
December 31,
  
September  30,
SUMMARY BALANCE SHEETS:
  
2009
  
2008
  
2008
Assets:
                  
Cash and fixed maturity securities
  
$
9,226.2
  
$
8,358.9
  
$
8,101.3
Equity securities
    
473.5
    
350.3
    
484.1
Other invested assets
    
144.5
    
145.8
    
148.2
   Cash and invested assets
    
9,844.3
    
8,855.1
    
8,733.7
Accounts and premiums receivable
    
962.9
    
806.7
    
838.8
Federal income tax recoverable: Current
    
9.7
    
41.0
    
9.5
Reinsurance balances recoverable
    
2,581.1
    
2,448.0
    
2,434.4
Prepaid federal income taxes
    
221.4
    
463.4
    
501.3
Sundry assets
    
689.4
    
651.7
    
685.8
   Total
  
$
14,309.1
  
$
13,266.0
  
$
13,203.8
Liabilities and Shareholders’ Equity:
                  
Policy liabilities
  
$
1,371.7
  
$
1,293.0
  
$
1,360.0
Benefit and claim reserves
    
7,806.5
    
7,241.3
    
7,025.6
    Federal income tax payable: Deferred
    
54.9
    
77.3
    
118.7
Debt
    
372.2
    
233.0
    
124.1
Sundry liabilities
    
802.3
    
680.9
    
660.8
Shareholders’ equity
    
3,901.3
    
3,740.3
    
3,914.3
   Total
  
$
14,309.1
  
$
13,266.0
  
$
13,203.8
                   
   
Quarters Ended
  
Nine Months Ended
  
Fiscal Twelve Months Ended
SUMMARY INCOME STATEMENTS:
  
September 30,
  
September 30,
  
September 30,
   
2009
  
2008
  
2009
  
2008
  
2009
  
2008
Net premiums and fees earned
  
$
856.1
  
$
835.2
  
$
2,445.4
  
$
2,517.5
  
$
3,246.0
  
$
3,414.5
Net investment income
    
96.7
    
93.8
    
283.9
    
282.3
    
378.9
    
381.8
Other income
    
5.7
    
7.2
    
20.0
    
24.6
    
24.0
    
32.9
Net realized investment gains (losses)
    
(.9)
    
6.7
    
(.5)
    
(422.8)
    
(64.1)
    
(372.7)
   Total revenues
    
957.6
    
943.1
    
2,748.8
    
2,401.6
    
3,584.9
    
3,456.5
Benefits and claims
    
671.2
    
683.2
    
1,962.8
    
2,017.1
    
2,661.4
    
2,680.1
Sales and other expenses
    
398.1
    
333.3
    
1,076.1
    
1,015.6
    
1,401.7
    
1,387.1
   Total expenses
    
1,069.4
    
1,016.5
    
3,039.0
    
3,032.8
    
4,063.2
    
4,067.3
Pretax income (loss)
    
(111.7)
    
(73.4)
    
(290.2)
    
(631.1)
    
(478.2)
    
(610.7)
Income taxes (credits)
    
(65.4)
    
(25.3)
    
(174.1)
    
(199.3)
    
(235.6)
    
(199.1)
   Net income (loss)
  
$
(46.2)
  
$
(48.0)
  
$
(116.0)
  
$
(431.8)
  
$
(242.5)
  
$
(411.5)
                                     
COMMON STOCK STATISTICS (a):
                                    
Net income (loss):
Basic
  
$
(.20)
  
$
(.21)
  
$
(.49)
  
$
(1.87)
  
$
(1.04)
  
$
(1.78)
 
Diluted
  
$
(.20)
  
$
(.21)
  
$
(.49)
  
$
(1.87)
  
$
(1.04)
  
$
(1.78)
Components of earnings per share:
                                    
  Basic, net operating income (loss)
  
$
(.28)
  
$
(.20)
  
$
(.72)
  
$
(.50)
  
$
(1.03)
  
$
(.55)
  Realized investment gains (losses)
    
.08
    
(.01)
    
.23
    
(1.37)
    
(.01)
    
(1.23)
 Basic net income (loss)
  
$
(.20)
  
$
(.21)
  
$
(.49)
  
$
(1.87)
  
$
(1.04)
  
$
(1.78)
  Diluted, net operating income (loss)
  
$
(.28)
  
$
(.20)
  
$
(.72)
  
$
(.50)
  
$
(1.03)
  
$
(.55)
  Realized investment gains (losses)
    
.08
    
(.01)
    
.23
    
(1.37)
    
(.01)
    
(1.23)
 Diluted net income (loss)
  
$
(.20)
  
$
(.21)
  
$
(.49)
  
$
(1.87)
  
$
(1.04)
  
$
(1.78)
Cash dividends on common stock
  
$
.17
  
$
.17
  
$
.51
  
$
.50
  
$
.68
  
$
.66
Book value per share
                          
$
16.54
  
$
16.96
Common shares outstanding:
                                    
   Average basic
    
235,761,056
    
230,735,600
    
235,563,448
    
230,716,219
    
235,125,863
    
230,706,704
   Average diluted
    
235,761,056
    
230,735,600
    
235,563,448
    
230,716,219
    
235,125,863
    
230,872,666
   Actual, end of period
                            
235,837,579
    
230,753,860
                                     
SUMMARY STATEMENTS OF COMPREHENSIVE INCOME (LOSS):
                        
Net income (loss) as reported
  
$
(46.2)
  
$
(48.0)
  
$
(116.0)
  
$
(431.8)
  
$
(242.5)
  
$
(411.5)
Post-tax net unrealized gains (losses)
    
222.9
    
(56.8)
    
367.8
    
(85.2)
    
374.9
    
(109.0)
Other adjustments
    
8.3
    
(2.7)
    
17.2
    
(7.2)
    
(32.4)
    
8.3
   Net adjustments
    
231.3
    
(59.6)
    
385.1
    
(92.5)
    
342.5
    
(100.6)
Comprehensive income (loss)
  
$
185.0
  
$
(107.6)
  
$
269.0
  
$
(524.3)
  
$
99.9
  
$
(512.2)
                                     

 
-more-
 
 
Old Republic International Corporation
Add 9


Old Republic International Corporation
Segmented Operating Summary (Unaudited)
                                   
 
Net
                          
Pretax
  
Composite
 
Premiums
  
Net
              
Sales &
      
Operating
  
Under-
 
& Fees
  
Investment
  
Other
  
Operating
  
Benefits
  
Other
  
Total
  
Income
  
writing
 
Earned
  
Income
  
Income
  
Revenues
  
& Claims
  
Expenses
  
Expenses
  
(Loss)
  
Ratios
                                   
Quarter Ended September 30, 2009
                                          
                                                     
General
$
446.7
  
$
64.7
  
$
2.8
  
$
514.4
  
$
346.2
  
$
124.4
  
$
470.6
  
$
43.7
  
103.3
%
Mortgage
  
138.9
    
23.8
    
1.8
    
164.6
    
297.3
    
27.6
    
325.0
    
(160.4)
  
231.3
  
Title
  
253.3
    
6.3
    
                 -
    
259.7
    
20.9
    
234.7
    
255.6
    
4.0
  
99.4
  
Other
  
17.0
    
1.7
    
.9
    
19.8
    
6.6
    
11.3
    
18.0
    
1.8
  
                   -
  
Consolidated
$
856.1
  
$
96.7
  
$
5.7
  
$
958.6
  
$
671.2
  
$
398.1
  
$
1,069.4
  
$
(110.7)
  
122.8
%
                                                     
Quarter Ended September 30, 2008
                                          
                                                     
General
$
500.3
  
$
61.9
  
$
3.3
  
$
565.7
  
$
363.0
  
$
125.6
  
$
488.6
  
$
77.0
  
96.3
%
Mortgage
  
148.4
    
22.0
    
2.4
    
172.8
    
301.3
    
24.3
    
325.7
    
(152.8)
  
217.9
  
Title
  
168.4
    
6.2
    
-
    
174.7
    
11.8
    
172.6
    
184.4
    
(9.7)
  
109.2
  
Other
  
18.0
    
3.6
    
1.3
    
23.0
    
6.9
    
10.7
    
17.7
    
5.3
  
                   -
  
Consolidated
$
835.2
  
$
93.8
  
$
7.2
  
$
936.3
  
$
683.2
  
$
333.3
  
$
1,016.5
  
$
(80.1)
  
120.6
%
                                                     
                                                     
Nine Months Ended September 30, 2009
                                    
                                                     
General
$
1,344.9
  
$
191.8
  
$
8.5
  
$
1,545.2
  
$
1,022.9
  
$
373.8
  
$
1,396.8
  
$
148.4
  
102.1
%
Mortgage
  
425.8
    
68.4
    
8.1
    
502.4
    
867.7
    
77.7
    
945.5
    
(443.0)
  
218.9
  
Title
  
620.6
    
18.2
    
.1
    
639.0
    
47.3
    
591.1
    
638.4
    
.6
  
102.0
  
Other
  
54.0
    
5.3
    
3.2
    
62.6
    
24.8
    
33.4
    
58.2
    
4.3
  
                   -
  
Consolidated
$
2,445.4
  
$
283.9
  
$
20.0
  
$
2,749.4
  
$
1,962.8
  
$
1,076.1
  
$
3,039.0
  
$
(289.6)
  
122.5
%
                                                     
Nine Months Ended September 30, 2008
                                    
                                                     
General
$
1,507.4
  
$
189.1
  
$
12.1
  
$
1,708.7
  
$
1,097.0
  
$
388.4
  
$
1,485.4
  
$
223.2
  
97.0
%
Mortgage
  
445.2
    
65.0
    
8.7
    
518.9
    
855.9
    
78.9
    
934.9
    
(415.9)
  
208.1
  
Title
  
502.1
    
19.1
    
-
    
521.2
    
34.9
    
513.3
    
548.2
    
(27.0)
  
109.0
  
Other
  
62.7
    
9.0
    
3.8
    
75.6
    
29.2
    
34.9
    
64.2
    
11.4
  
             -
  
Consolidated
$
2,517.5
  
$
282.3
  
$
24.6
  
$
2,824.5
  
$
2,017.1
  
$
1,015.6
  
$
3,032.8
  
$
(208.3)
  
119.1
%
                                                     
                                                     
Fiscal Twelve Months Ended September 30, 2009
                                    
                                                     
General
$
1,826.8
  
$
256.2
  
$
9.4
  
$
2,092.5
  
$
1,378.3
  
$
494.6
  
$
1,872.9
  
$
219.5
  
100.9
%
Mortgage
  
573.1
    
90.3
    
10.0
    
673.6
    
1,192.5
    
102.4
    
1,295.0
    
(621.4)
  
223.3
  
Title
  
774.6
    
24.3
    
.2
    
799.2
    
58.0
    
759.8
    
817.9
    
(18.6)
  
104.8
  
Other
  
71.4
    
7.9
    
4.3
    
83.7
    
32.4
    
44.8
    
77.3
    
6.4
  
                   -
  
Consolidated
$
3,246.0
  
$
378.9
  
$
24.0
  
$
3,649.1
  
$
2,661.4
  
$
1,401.7
  
$
4,063.2
  
$
(414.0)
  
123.5
%
                                                     
Fiscal Twelve Months Ended September 30, 2008
                                    
                                                     
General
$
2,051.1
  
$
257.1
  
$
16.9
  
$
2,325.1
  
$
1,486.2
  
$
522.1
  
$
2,008.3
  
$
316.7
  
96.4
%
Mortgage
  
586.4
    
86.0
    
11.3
    
683.8
    
1,108.3
    
104.0
    
1,212.4
    
(528.5)
  
204.8
  
Title
  
694.1
    
26.1
    
(.4)
    
719.7
    
48.7
    
713.8
    
762.5
    
(42.7)
  
109.6
  
Other
  
82.7
    
12.5
    
5.1
    
100.5
    
36.7
    
47.1
    
83.8
    
16.6
  
                   -
  
Consolidated
$
3,414.5
  
$
381.8
  
$
32.9
  
$
3,829.3
  
$
2,680.1
  
$
1,387.1
  
$
4,067.3
  
$
(237.9)
  
117.8
%
                                                     
                                                     

-more-
 
 
Old Republic International Corporation
Add 10
 
Old Republic International Corporation
Segmented Operating Statistics
  
   
Quarters Ended
  
Nine Months Ended
  
Fiscal Twelve Months Ended
  
   
September 30,
  
September 30,
  
September 30,
  
   
2009
  
2008
  
2009
  
2008
  
2009
  
2008
  
General Insurance:
                                      
Benefits and claim ratio
    
77.5%
    
72.5%
    
76.1%
    
72.8%
    
75.4%
    
72.5%
  
Expense ratio
    
25.8
    
23.8
    
26.0
    
24.2
    
25.5
    
23.9
  
Composite ratio
    
103.3%
    
96.3%
    
102.1%
    
97.0%
    
100.9%
    
96.4%
  
                                       
Paid loss ratio
    
73.6%
    
65.4%
    
75.0%
    
68.3%
    
74.9%
    
65.6%
  
                                       
                                       
Mortgage Guaranty:
                                      
New insurance written:
                                      
Traditional Primary
  
$
1,993.6
  
$
4,318.6
  
$
6,778.8
  
$
18,171.6
  
$
9,469.2
  
$
28,839.0
  
Bulk
    
-
    
-
    
-
    
3.5
    
-
    
136.4
  
Other
    
-
    
383.6
    
.5
    
1,096.2
    
27.8
    
1,553.9
  
Total
  
$
1,993.6
  
$
4,702.2
  
$
6,779.4
  
$
19,271.4
  
$
9,497.0
  
$
30,529.4
  
                                       
Risk in force:
                                      
Traditional Primary
                          
$
19,279.6
  
$
20,489.5
  
Bulk
                            
1,849.1
    
2,116.8
  
Other
                            
297.5
    
458.8
  
Total
                          
$
21,426.4
  
$
23,065.2
  
By loan type:
                                      
Traditional Primary:
                                      
Fixed rate
                            
96.1%
    
95.6%
  
Adjustable rate
                            
3.9%
    
4.4%
  
Bulk:
                                      
Fixed rate
                            
75.4%
    
73.6%
  
Adjustable rate
                            
24.6%
    
26.4%
  
                                       
Balance Sheet Leverage Ratios (b):
                                      
Risk to Capital Ratio -
                                      
Performing risk basis
                            
20.9:1
    
16.1:1
  
Total Financial Resources
                                      
to Risk Ratio
                            
12.7%
    
11.2%
  
                                       
Earned premiums:
                                      
Direct
  
$
77.7
  
$
175.3
  
$
413.5
  
$
526.0
  
$
586.0
  
$
694.5
  
Net
  
$
138.9
  
$
148.4
  
$
425.8
  
$
445.2
  
$
573.1
  
$
586.4
  
                                       
Persistency:
                                      
Traditional Primary
                            
83.4%
    
81.4%
  
Bulk
                            
89.3%
    
86.3%
  
                                       
Delinquency ratio:
                                      
Traditional Primary
                            
15.04%
    
8.36%
  
Bulk
                            
27.57%
    
13.80%
  
                                       
Claim ratio
    
214.0%
    
203.1%
    
203.8%
    
192.3%
    
208.1%
    
189.0%
  
Expense ratio
    
17.3
    
14.8
    
15.1
    
15.8
    
15.2
    
15.8
  
Composite ratio
    
231.3%
    
217.9%
    
218.9%
    
208.1%
    
223.3%
    
204.8%
  
                                       
Paid loss ratio
    
57.8%
    
84.7%
    
92.5%
    
66.6%
    
94.3%
    
63.1%
  
                                       
                                       
Title Insurance:
                                      
Direct orders opened
    
83,018
    
61,039
    
271,080
    
196,649
    
332,174
    
259,091
  
Direct orders closed
    
68,824
    
43,509
    
204,409
    
141,323
    
246,203
    
187,872
  
                                       
Reserves to paid losses ratio (b)
                            
5.0:1
    
6.0:1
  
                                       
Claim ratio
    
8.3%
    
7.0%
    
7.6%
    
7.0%
    
7.5%
    
7.0%
  
Expense ratio
    
91.1
    
102.2
    
94.4
    
102.0
    
97.3
    
102.6
  
Composite ratio
    
99.4%
    
109.2%
    
102.0%
    
109.0%
    
104.8%
    
109.6%
  
                                       
Paid loss ratio
    
5.6%
    
6.4%
    
7.8%
    
7.4%
    
9.2%
    
7.8%
  
                                       
                                       
Consolidated:
                                      
Benefits and claim ratio
    
78.4%
    
81.8%
    
80.3%
    
80.1%
    
82.0%
    
78.5%
  
Expense ratio
    
44.4
    
38.8
    
42.2
    
39.0
    
41.5
    
39.3
  
Composite ratio
    
122.8%
    
120.6%
    
122.5%
    
119.1%
    
123.5%
    
117.8%
  
                                       
Paid loss ratio
    
50.2%
    
56.6%
    
60.5%
    
55.5%
    
62.3%
    
53.0%
  
                                       

 
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Old Republic International Corporation
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Notes to Accompanying Financial Summaries
($ in Millions, Except Share Data)
(a)  All per share statistics herein have been adjusted to reflect all stock dividends or splits declared through September 30, 2009. In calculating book value and earnings per share, accounting rules require that common shares owned by the Company’s Employee Savings and Stock Ownership Plan that are as yet unallocated to participants in the plan be excluded from the calculation. Such shares are issued and outstanding, have the same voting and other rights applicable to all other common shares, and may be sold at any time by the plan.
 
(b)  Old Republic monitors certain balance sheet leverage and trends therein through these ratios with respect to its mortgage guaranty (b – 1 & 2) and title (b – 3) segments:
 
1 - Risk to Capital Ratio – Performing risk basis: This ratio measures the Company’s outstanding net risk in force only on those mortgage loans that are current as to principal and interest in relation to total statutory capital. This ratio therefore excludes non-performing risk exposures (i.e. the outstanding risk on reported loans in default) for which the expected ultimate loss cost has been recognized through the establishment of claim reserves. The Company believes this ratio better matches available statutory capital with the portion of the risk in force for which no claim reserves are required.
 
2 - Total Financial Resources to Risk Ratio: This ratio measures all of the claim resources available to the Company, including statutory capital, and claim and unearned premium reserves in relation to total net risk in force. The Company believes this ratio is conceptually similar to a banking institution’s capital to assets leverage ratio, whereby the non-balance sheet value of a mortgage guaranty insurer’s net risk in force is related to total balance sheet resources available to meet estimated losses from outstanding risk exposures.
 
      3 - The Title Reserves to Paid Losses Ratio represents average paid losses for the most recent five years divided into claim reserves at the end of any one year or interim period. The higher this ratio, the greater is a title insurer’s expected ability to meet obligations to its assureds.

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Old Republic International Corporation
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Safe Harbor Statement
Historical data pertaining to the operating results, liquidity, and other performance indicators applicable to an insurance enterprise such as Old Republic are not necessarily indicative of results to be achieved in succeeding years. In addition to the factors cited below, the long-term nature of the insurance business, seasonal and annual patterns in premium production and incidence of claims, changes in yields obtained on invested assets, changes in government policies and free markets affecting inflation rates and general economic conditions, and changes in legal precedents or the application of law affecting the settlement of disputed and other claims can have a bearing on period-to-period comparisons and future operating results.

Some of the oral or written statements made in the Company’s reports, press releases, and conference calls following earnings releases, can constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Of necessity, any such forward-looking statements involve assumptions, uncertainties, and risks that may affect the Company’s future performance. With regard to Old Republic’s General Insurance segment, its results can be 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, work-related injuries, and unanticipated external events. Mortgage Guaranty and Title Insurance results can be affected by similar factors, and by changes in national and regional housing demand and values, the availability and cost of mortgage loans, employment trends, and default rates on mortgage loans. Mortgage Guaranty results, in particular, may also be affected by various risk-sharing arrangements with business producers, as well as the risk management and pricing policies of government sponsored enterprises. Life and health insurance earnings can be affected by the levels of employment and consumer spending, variations in mortality and health trends, and changes in policy lapsation rates. At the parent holding company level, operating earnings or losses are generally reflective of the amount of debt outstanding and its cost, interest income on temporary holdings of short-term investments, and period-to-period variations in the costs of administering the Company’s widespread operations.

A more detailed listing and discussion of the risks and other factors which affect the Company’s risk-taking insurance business are included in Part I, Item 1A - Risk Factors, of the Company’s 2008 Form 10-K annual report to the Securities and Exchange Commission, which Item is specifically incorporated herein by reference.

Any forward-looking statements or commentaries speak only as of their dates. Old Republic undertakes no obligation to publicly update or revise any and all such comments, whether as a result of new information, future events or otherwise, and accordingly they may not be unduly relied upon.
 
 


For the latest news releases and other corporate documents on Old Republic:
Please write to:
Investor Relations
Old Republic International Corporation
307 North Michigan Avenue
Chicago, IL  60601
312-346-8100
or visit us at www.oldrepublic.com
 
 
 
 
 
 
 
 
 


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