• Consolidated Pretax Operating Income: $229 million, down from $251 million in 2023.
• Consolidated Combined Ratio: 95, compared to 92 last year.
• General Insurance Pretax Operating Income: $197 million, down from $216 million last year.
• General Insurance Combined Ratio: 94, compared to 89 last year.
• Title Insurance Pretax Operating Income: $40 million for the quarter.
• Title Insurance Combined Ratio: 96.7, unchanged from the previous year.
• Net Operating Income: $183 million for the third quarter, compared to $200 million last year.
• Net Operating Income Per Share: $0.71, compared to $0.72 last year.
• Net Investment Income: Increased by 17% in the quarter.
• Book Value Per Share: $25.71, an increase of 13.7% since year-end.
• Dividends Paid: Approximately $67 million.
• Share Repurchases: $165 million worth of shares repurchased during the quarter.
• General Insurance Net Written Premiums: Up 16% in the quarter.
• ENS Premiums: Up 21% in the quarter, running at $585 million on a trailing 12-month basis.
• Title Group Premium and Fee Revenue: $709 million, an increase of nearly 4% from the third quarter last year.
• Commercial Premiums: Decreased by 6%, representing approximately 20% of net premiums for the quarter.
• New Open Residential Title Orders: Up 26% compared to the third quarter of 2023.

• Warning! GuruFocus has detected 6 Warning Sign with ORI.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Old Republic International Corp (NYSE:ORI) reported a strong balance sheet, returning capital to shareholders through dividends and share repurchases.
• Net investment income increased by 17% in the quarter, driven by higher yields on the bond portfolio.
• General insurance net written premiums were up 16% in the quarter, with strong renewal retention rate increases and new business growth.
• The company is on track to produce its 10th consecutive year of favorable loss reserve development.
• Title insurance saw a 4% increase in premium and fee revenue compared to the third quarter of last year, with direct new title orders up 11%.

Negative Points

• Consolidated pretax operating income decreased to $229 million from $251 million in the previous year.
• The combined ratio for general insurance increased to 94 from 89 last year, reflecting lower favorable prior year loss reserve development.
• Title insurance faced headwinds due to high mortgage interest rates and a tight real estate market.
• Unfavorable development of around $25 million was recorded within financial indemnity, primarily related to transactional risks.
• The expense ratio for title insurance remained high at 94%, consistent with the previous year, indicating ongoing cost pressures.

Q & A Highlights

Q: Can you provide an update on the capital management initiatives, specifically regarding share repurchase expectations for the remainder of the year and into 2025? A: Frank Sodaro, CFO, stated that share repurchases in the quarter amounted to $165 million, with an additional $23 million since the end of the quarter. This brings the total for the year to $768 million. There is about $385 million remaining in the current authorization. Craig Smiddy, CEO, added that the pace of repurchases depends on valuation and could continue through the end of the year or into the first quarter of next year.

Q: Could you elaborate on the growth in the ENS (Excess and Surplus) lines and the role of new ventures in this growth? A: Craig Smiddy, CEO, explained that Old Republic Union, their non-admitted Surplus Lines company, is seeing growth primarily from new subsidiaries like Old Republic ENS and Old Republic Inland Marine. The ENS premiums were up 21% in the quarter, and this growth is expected to continue at a strong pace over the next few years.

Q: Regarding the $25 million unfavorable development in financial lines, is this a one-time situation or could it continue in future quarters? A: Craig Smiddy, CEO, clarified that the transactional risk business is a small part of their professional liability unit. The unfavorable development was due to a small number of claims with severity, and they have taken a conservative approach by putting up reserves. The situation will be monitored, but the current reserves reflect their best view.

Q: Are you experiencing the same frequency and severity trends in commercial auto as the industry, and how does your book differ from peers? A: Craig Smiddy, CEO, noted that while their book is different in terms of reserving and claims practices, they are not immune to industry trends in frequency and severity. They have been proactive in adjusting pricing and reserving practices, which has helped maintain favorable results compared to the industry.

Q: With the uncertainty in the real estate market, how are you approaching budgeting for new and refinancing activities in the title insurance segment? A: Carolyn Monroe, CEO of Old Republic National Title Holding Company, mentioned that they have seen a slight increase in orders each quarter, which is a positive sign. However, predicting future trends is challenging, and they are focusing on modernization efforts and technology investments to prepare for market recovery.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.