• Consolidated Pretax Operating Income: $285 million, up from $237 million in 2023.
• Consolidated Combined Ratio: 92.7%, compared to 93.3% last year.
• Specialty Insurance Net Premiums Earned: Increased by 13% in the fourth quarter.
• Specialty Insurance Pretax Operating Income: $228 million, up from $195 million last year.
• Specialty Insurance Combined Ratio: 91.8%, compared to 92% last year.
• Title Insurance Premiums and Fees: Grew by 9% in the fourth quarter.
• Title Insurance Pretax Operating Income: $55 million, up from $44 million last year.
• Title Insurance Combined Ratio: 94.4%, compared to 95.5% last year.
• Net Operating Income: $227 million for the quarter, compared to $190 million last year.
• Net Operating Income Per Share: $0.90, compared to $0.69 last year.
• Net Investment Income: Increased by 10% in the quarter.
• Book Value Per Share: $22.84, an increase of 11% for the year.
• Dividends and Share Repurchases: Nearly $560 million of dividends declared and $174 million worth of shares repurchased in the quarter.
• Commercial Auto Net Premiums Written: Grew 15% in the fourth quarter.
• Workers' Compensation Net Premiums Written: Increased by about 1% in the fourth quarter.
• Title Insurance Premium and Fee Revenue: $702 million, an increase of 9% from the fourth quarter of 2023.
• Title Insurance Pretax Operating Income: $55 million, an increase of 26% over the fourth quarter of last year.

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

Release Date: January 23, 2025

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 significant increase in consolidated pretax operating income, rising to $285 million in Q4 2024 from $237 million in the previous year.
• The specialty insurance segment saw a 13% growth in net premiums earned during the fourth quarter, contributing to a pretax operating income of $228 million, up from $195 million last year.
• Title Insurance premiums and fees grew by 9% in the fourth quarter, achieving a pretax operating income of $55 million, an increase from $44 million in the previous year.
• The company declared a special dividend of $2 per share in the fourth quarter, reflecting a strong commitment to returning capital to shareholders.
• Net investment income increased by 10% in the quarter, driven by higher yields on the bond portfolio, with the average reinvestment rate on corporate bonds at 4.8%.

Negative Points

• The value of Old Republic International Corp (NYSE:ORI)'s total investment portfolio decreased by approximately $400 million during the quarter.
• The consolidated loss ratios benefited less from favorable development in the quarter, with a reduction to 2.9 percentage points compared to 4.7 percentage points last year.
• Unfavorable development was noted in general liability and transactional risk, leading to the decision to exit the transactional risk segment.
• The full year combined ratio for specialty insurance increased by 2 points compared to 2023, reflecting a lower level of favorable prior year loss reserve development.
• The company faced challenges in the real estate market, with 2023 and 2024 being described as difficult years, although there are signs of improvement.

Q & A Highlights

Q: Can you provide insights into the growth drivers for general liability, home and auto warranty, and property business segments? A: Craig Smiddy, President and CEO, explained that growth in these segments is largely driven by new underwriting subsidiaries. For property, Inland Marine and E&S operations are contributing significantly. While home warranty is down due to the real estate market, auto warranty has seen growth from new agreements.

Q: What is the competitive landscape for the commercial auto business, and how are you managing rate increases? A: Craig Smiddy noted that Old Republic has been proactive in adjusting rates to match severity trends since 2018-2019. The company has consistently achieved double-digit rate increases, which has resulted in favorable development compared to industry peers. This approach has allowed them to maintain profitability despite industry challenges.

Q: Could you discuss the current capital management strategy, particularly the balance between dividends and stock repurchases? A: Craig Smiddy stated that despite returning significant capital to shareholders, strong earnings have replenished their capital reserves. The $2 special dividend was a strategic move to quickly return capital, while share repurchases remain opportunistic, depending on market conditions and trading prices.

Q: How is the investment portfolio positioned in terms of new money yields, duration, and the balance between fixed income and equities? A: Frank Sodaro, CFO, mentioned that the portfolio is currently balanced with 84% in fixed income and 16% in equities. New money yields on corporate bonds are at 4.8%, with the portfolio yield at 4.5%. The company maintains flexibility to adjust based on market opportunities, while matching liabilities with asset duration.

Q: What factors are considered in determining excess capital, and how do you assess your current capital position? A: Craig Smiddy explained that they evaluate capital using various metrics, including liquidity, leverage ratios, RBC ratios, and discussions with rating agencies. Despite recent capital returns, they maintain sufficient capital with a cushion, ensuring a strong financial position.

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