By Chris Munro

Jan 24 - (The Insurer) - Old Republic CEO Craig Smiddy is confident the company’s “very diligent” monitoring of commercial auto trends means it will remain profitable in the sector amid continued elevated severity trends and legal system abuse, while the executive also revealed the carrier’s Los Angeles wildfire losses are estimated at $10mn to $15mn.

The company generated $7.31bn of consolidated net premiums and fees earned in 2024, up 9.0 percent year on year.

Of that $7.31bn, specialty insurance – the new name for the company’s general insurance business which encompasses 17 underwriting subsidiaries – accounted for the majority at $4.68bn.

Commercial auto is the biggest line of business within Old Republic’s specialty insurance book. On a call to discuss the company’s Q4 and full-year 2024 earnings, Smiddy was asked to provide an update on the segment given the ongoing challenges seen in the broader sector.

“Since things really started to go sideways in 2018 and 2019, with respect to severity and legal system abuse and those things that are contributing to that severity, we have been very diligent at monitoring severity trend on a real-time basis, adjusting rates as we go along,” said Smiddy.

“Since that time period – five, six, seven years – [we have] been getting double-digit rate increases commensurate with the trend that we're seeing. So we have stayed on top of it,” the executive stated.

As Smiddy detailed in his prepared remarks during the earnings call, Old Republic’s commercial auto net premiums written grew 15 percent in Q4 2024, while the segment’s loss ratio improved 40 basis points year on year to 77.9 percent.

Old Republic’s full year 2024 commercial auto loss ratio deteriorated 90 basis points from 2023 to 72.4 percent.

In 2024, Old Republic recorded commercial auto rate increases of approximately 10 percent.

“And consistent with what we've said in the last several quarters and really several years, those rate increases are commensurate with the loss trends that we're observing,” Smiddy said.

The executive highlighted how Old Republic has also recorded favourable development within its commercial auto book, bucking the broader industry trend.

“If you think about the fact that we jumped on it early, that we monitor it as closely as we do and get rate changes commensurate with those severity trends, that compounding of rate has served us well and we are comfortable that as long as we stay current with the trends we're observing, we'll continue to be able to produce a profitable result [in commercial auto],” said Smiddy.

The executive said there continues to be opportunity for Old Republic to grow its commercial auto book as competitors have been raising rates “substantially”, whereas his company has been increasing prices more steadily.

“When it comes to severity, it seems like from some of the commentary of those competitors, they're still pointing to severity as the reason for their unfavorable development. But that's not a new story for us.

“We recognised that severity back in '18 and '19, and we've stayed on top of it. We made major corrections immediately, where we were getting rate increases that were upward toward even the high teens there for a while.

“And then we've just been getting the necessary rate increases since then in the 10 percent range to stay consistent with the severity trends we're seeing. So it seems like we're very comfortable with where we're at and that others are still trying to react and figure things out.”

Limited LA wildfire losses

On the call, Smiddy noted that Old Republic writes less catastrophe-exposed business than most of its peers.

As such, Smiddy said Old Republic currently estimates its ultimate LA wildfire losses at being between $10mn and $15mn.

“Our thoughts remain with all of those in the disaster areas, which includes about 100 of our associates,” Smiddy said.