Old Republic Reports Higher Third Quarter and Year-to-Date Operating Earnings

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October 27, 2005 at 9:03 AM EDT

Old Republic Reports Higher Third Quarter and Year-to-Date Operating Earnings

                 All Three Major Segments Show Profit Growth

    CHICAGO, Oct. 27 /PRNewswire-FirstCall/ --

                             Financial Highlights
            (unaudited; amounts in millions except share data and
      percentages; all  per-share amounts are stated on a diluted basis)

                             Quarters Ended          Nine Months Ended
                              September 30,             September 30,
                       2005      2004    Change   2005      2004    Change
    Total Revenues    $954.7    $880.3    8.5%  $2,779.9  $2,569.8    8.2%
    Net Operating
     Income           $119.2    $107.6   10.7%    $392.3*   $320.1   22.5%
    Net Income        $121.6    $109.1   11.5%    $408.2*   $334.5   22.0%
    Diluted Earnings
     Per Share:
      Net Operating
       Income          $0.64     $0.58   10.3%     $2.12*    $1.73   22.5%
      Net Income       $0.65     $0.59   10.2%     $2.20*    $1.81   21.5%

     * Includes non-recurring income tax and related accumulated interest
       recovery of $45.9 after tax, or 25 cents per share.

Old Republic International Corporation (NYSE: ORI) reported operating earnings growth of 10.7 percent for the third quarter of 2005. Net operating income, which excludes realized investment gains or losses, was $119.2 million, or 64 cents per share in the quarter compared to $107.6 million, or 58 cents per share, in the same year-ago period. Net income in this year's third quarter totaled $121.6 million, or 65 cents per share, versus $109.1 million, or 59 cents per share, for the year-ago quarter.

For the first nine months of 2005, net operating income grew by 22.5 percent to $392.3 million, or $2.12 per share in 2005, compared to $320.1 million, or $1.73 per share, for 2004. Net income was $408.2 million, or $2.20 per share, versus $334.5 million, or $1.81 per share, for the same period of 2004. Net operating and net income for the first nine months of 2005 include a non-recurring recovery of income taxes and related accumulated interest of $57.9 million ($45.9 million net of tax or 25 cents per share). The recovery stems from a recent favorable resolution of the Company's claim for a permanent Federal income tax refund applicable to the three years ended December 31, 1990. Consolidated pretax earnings for the first nine months of 2004 were affected adversely by required non-recurring stock option compensation charges of $5.6 million, (or 2 cents per share after tax) representing the expense of a vesting acceleration of stock option costs.

Consolidated Results

The major components of Old Republic's consolidated operating revenues and income were as follows for the periods shown:


                               ($ in Millions Except Share Data)
                            Quarters Ended           Nine Months Ended
                             September 30,              September 30,
                       2005      2004    Change   2005      2004     Change
    Operating revenues:
      General
       insurance      $510.7    $471.1     8.4% $1,506.5  $1,341.7    12.3%
      Mortgage
       guaranty        129.3     123.7     4.5     386.6     366.6     5.4
      Title insurance  288.6     263.6     9.5     795.3     779.7     2.0
      Corporate and
       other            22.3      19.5    14.4      66.8      58.8    13.6
        Total         $951.0    $878.0     8.3% $2,755.4  $2,547.0     8.2%
    Pretax operating
     income (loss):
      General
       insurance       $87.5     $87.2      .3%   $258.8    $244.9     5.7%
      Mortgage
       guaranty         55.9      53.7     4.1     188.5     170.7    10.4
      Title insurance   30.7      21.1    45.6      66.4      65.4     1.5
      Corporate and
       other             1.8      (2.0)             (2.4)     (6.1)
    Realized investment
     gains (losses):
      From sales         4.9       2.2              31.0      22.7
      From impairments  (1.2)      -                (6.5)      -
        Sub-total        3.7       2.2              24.5      22.7
    Consolidated pretax
     income            179.8     162.3    10.7     535.9     497.7     7.7
      Income taxes      58.1      53.2     9.2     127.6     163.1   (21.8)
      Net income      $121.6    $109.1    11.5%   $408.2    $334.5    22.0%

    Consolidated
     composite ratio:
      Benefits and
       claims           43.5%     43.3%             43.7%     41.8%
      Expense           44.6      45.1              44.4      46.2
        Composite
         ratio          88.1%     88.4%             88.1%     88.0%

    Components of
     diluted earnings
     per share:
      Net operating
       income before
       non-recurring
       income tax
       benefit          $0.64     $0.58   10.3%    $1.87     $1.73     8.1%
      Non-recurring
       income tax
       benefit            -         -               0.25       -
      Net operating
       income            0.64      0.58   10.3      2.12      1.73    22.5
        Net realized
         investment
         gains           0.01      0.01             0.08      0.08
        Net income      $0.65     $0.59   10.2%    $2.20     $1.81    21.5%

Consolidated results are provided in terms of both operating and net income to highlight the effect of investment gain or loss recognition on period-to-period comparisons. Recognition of such gains or losses can be highly discretionary and arbitrary due to such factors as the timing of individual securities sales, recognition of losses from write-downs of 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.

For the third quarter and first nine months of 2005 consolidated operating revenue growth was affected mostly by higher premiums and fees in each of the Company's major segments. Consolidated pretax operating income for these periods benefited from reasonably stable underwriting/service income in these segments, and from higher investment income generated by a greater invested asset base.

General Insurance Results

The following highlights reflect the progress of Old Republic's General Insurance business for the third quarter and first nine months of 2005.


                                        ($ in Millions)
                           Quarters Ended             Nine Months Ended
                            September 30,               September 30,
                      2005      2004     Change   2005      2004    Change
    Net premiums
     earned          $457.4    $421.3     8.6%  $1,349.9  $1,194.2   13.0%
    Net investment
     income            49.1      45.7     7.4      144.8     135.2    7.1
    Pretax operating
     income           $87.5     $87.2     0.3%    $258.8    $244.9    5.7%


    Benefits and
     claims ratio      67.0%     66.1%              67.1%     66.0%
    Expense ratio      24.5      23.9               24.3      24.7
      Composite ratio  91.5%     90.0%              91.4%     90.7%

General Insurance earned premiums continued to reflect the positive pricing and risk selection changes effected during the past few years, as well as additional business produced in an environment marked by reasonably stable underwriting discipline on the part of many competitors. Underwriting results in the latest quarter and year-to-date period continued to benefit from fairly stable overall claims ratios, and firm production and administrative expense control. Claim costs attributable to hurricane Katrina added approximately 1.0 percentage point to the composite ratio during the third quarter. The decline in underwriting results during the third quarter of 2005 by comparison to the same period in 2004 was slightly more than offset by the increase in net investment income. The composite underwriting ratio represents the most widely accepted indicator of underwriting performance in the industry, and Old Republic has now registered a favorable general insurance composite ratio below 100 percent for 14 consecutive quarters.

Mortgage Guaranty Results

Old Republic's Mortgage Guaranty Group performed within expectations for the first nine months of 2005. Performance indicators of this segment follow:


                                        ($ in Millions)
                           Quarters Ended             Nine Months Ended
                            September 30,               September 30,
                       2005     2004     Change   2005      2004    Change
    Net premiums
     earned           $107.6   $102.3     5.1%   $321.5    $301.5     6.7%
    Net investment
     income             17.2     16.9     1.7      52.2      50.2     3.9
    Pretax operating
     income            $55.9    $53.7     4.1%   $188.5    $170.7    10.4%

    Claims ratio        42.4%    41.4%             35.4%     34.4%
    Expense ratio       21.6     22.6              22.2      25.7
      Composite ratio   64.0%    64.0%             57.6%     60.1%

For both the third quarter and first nine months of 2005, the Company's Mortgage Guaranty segment reflected moderate operating income growth from its underwriting/service functions in particular. Net premiums earned rose by mid-single digits principally due to bulk business growth as well as a higher average premium rate on new traditional primary business production. The composite underwriting ratios for 2005 interim periods were stable to moderately lower in comparison to the same periods of the preceding year. This ratio's generally positive trend in 2005 is mainly due to a decline in the sales and operating expense component.

Title Insurance Results

    Old Republic's Title Insurance segment turned in much improved results
this quarter.  Major indicators of that performance follow:


                                         ($ in Millions)
                             Quarters Ended           Nine Months Ended
                              September 30,              September 30,
                       2005      2004    Change   2005      2004    Change
    Net premiums and
     fees earned      $282.0    $256.9    9.8%   $775.5    $759.8     2.1%
    Net investment
     income              6.3       6.4   (1.7)     19.1      18.9     0.8
    Pretax operating
     income            $30.7     $21.1   45.6%    $66.4     $65.4     1.5%

    Claims ratio         5.9%      5.8%             5.9%      5.8%
    Expense ratio       85.4      88.5             87.9      88.1
      Composite ratio   91.3%     94.3%            93.8%     93.9%

During the first nine months of 2005, housing and mortgage lending trends were relatively uneven in many parts of the nation. Net premiums and fees earned by Old Republic's Title Insurance group reflected this environment. Year over year the Group's revenues were down by 1 percent in the first quarter, down by 2.6 percent in the second quarter, and up by nearly 10 percent in the third quarter. Pretax operating earnings for this segment generally followed these quarterly revenue patterns. While the claims ratio was relatively stable for each of the first three quarters, the expense component of the ratio was impacted favorably by expense control efforts and by production and other costs that rose at a slower pace than revenues.

Corporate and Other Operations

Combined results for Old Republic's small life and health insurance business and net corporate expenses reflected a pretax operating deficit of $2.4 million and pretax operating income of $1.8 million in the first nine months and third quarter of 2005, respectively. For the same periods of 2004, the comparable operating deficits amounted to $6.1 million and $2.0 million, respectively. These results are reflective of holding company expenses and debt service costs, income on short term investment holdings, and higher earnings from Old Republic's small book of life and accident and health business.

Cash, Invested Assets and Shareholders' Equity

The following table shows the growth in consolidated cash and invested assets and shareholders' equity, along with the corresponding per share amounts as of the dates shown:


                            ($ in Millions except Share Data)
                                                               % Change
                  September    December     September    Sept '05/   Sept '05/
                    2005         2004         2004        Dec '04    Sept '04

    Cash and
     invested
     assets:
      Total      $7,957.8     $7,519.5     $7,315.9         5.8%        8.8%
      Per share     43.43        41.19        40.12         5.4         8.3
    Shareholders'
     equity:
      Total, as
       reported   4,128.5      3,865.6      3,791.6         6.8         8.9
      Per Share:
        as
         reported   22.53        21.17        20.79         6.4         8.4
        at cost    $22.03       $20.24       $19.80         8.8%       11.3%

Consolidated operating cash flow amounted to $655.8 million for the first nine months of 2005 versus $605.0 million for the same period of 2004. Each of the Company's major segments sustained positive operating cash flow during 2005.

Old Republic's high quality investment portfolio reflects a current allocation of approximately 87 percent in fixed-income investments and 6 percent in equities. As has been the case for many years, it contains little or no exposure to real estate investments, mortgage-backed securities, derivatives, junk bonds, private placements or mortgage loans. The rise in the shareholders' equity account resulted mostly from earnings retained in excess of cash dividends paid to shareholders. Equity per share as reported is inclusive of unrealized gains or losses on investments whereas the cost basis is exclusive of such gains and losses.

Conference Call Information

Old Republic has scheduled a conference call today at 2:00 p.m. Central Time to discuss its third quarter 2005 performance and related trends in its business. To access this call, log on to http://www.oldrepublic.com 15 minutes before the call to download the necessary software. Replays will be available through this website for 30 days.

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 and liability, mortgage guaranty, and title insurance fields. One of the nation's 50 largest publicly owned insurance organizations, Old Republic has assets of approximately $11.3 billion and shareholders' equity of $4.1 billion or $22.53 per share. Its current stock market valuation is approximately $4.7 billion, or $25.39 per share.

Safe Harbor Statement

Historical data pertaining to the operating performance, 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 statements made in this News Release and Company published reports, as well as oral statements or commentaries made by the Company's management in 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, commentaries, or inferences, 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 impacted by similar factors and, most particularly, 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. Additionally, mortgage guaranty results, 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 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.

Any forward-looking statements or commentaries speak only as of their dates. Old Republic undertakes no obligation to publicly update or revise 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
                                International
                      Visit: http://www.oldrepublic.com

    Financial Tables Follow ... .



                    Old Republic International Corporation
                             FINANCIAL HIGHLIGHTS
                      ($ in Millions, Except Share Data)

                                                  Quarters Ended
                                                   September 30,
                                                 2005          2004   Change
    NET INCOME:
          Total                                 $121.6        $109.1   11.5%

          Per Share:  Basic                      $0.66         $0.60   10.0%

                      Diluted                    $0.65         $0.59   10.2%


    Average number of shares outstanding:
                      Basic                183,217,078   182,327,380

                      Diluted              185,630,338   184,417,471

    COMPOSITION OF EARNINGS PER SHARE:
    Basic Earnings:
          Net operating income                   $0.65         $0.59   10.2%
          Realized investment gains               0.01          0.01
              Net income                         $0.66         $0.60   10.0%
    Diluted Earnings:
          Net operating income                   $0.64         $0.58   10.3%
          Realized investment gains               0.01          0.01
              Net income                         $0.65         $0.59   10.2%


                                                 Nine Months Ended
                                                   September 30,
                                                 2005          2004   Change
    NET INCOME:
          Total                                 $408.2        $334.5   22.0%

          Per Share:  Basic                      $2.23         $1.84   21.2%

                      Diluted                    $2.20         $1.81   21.5%


    Average number of shares outstanding:
                      Basic                183,202,689   182,317,511

                      Diluted              185,295,639   184,474,671

    COMPOSITION OF EARNINGS PER SHARE:
    Basic Earnings:
          Net operating income                   $2.14         $1.76   21.6%
          Realized investment gains               0.09          0.08
              Net income                         $2.23         $1.84   21.2%
    Diluted Earnings:
          Net operating income                   $2.12         $1.73   22.5%
          Realized investment gains               0.08          0.08
              Net income                         $2.20         $1.81   21.5%



    FINANCIAL POSITION SUMMARY:

                                          September    December    September
                                             30,          31,          30,
                                            2005         2004         2004
    Assets:
      Cash and fixed maturity
       securities                         $7,338.1     $6,905.2     $6,666.0
      Equity securities                      455.5        459.0        503.7
      Other invested assets                  164.1        155.2        146.1
      Accounts and premiums receivable       636.6        543.9        549.3
      Reinsurance balances recoverable     2,075.5      1,846.5      1,834.5
      Sundry assets                          672.5        660.7        686.1
          Total                          $11,342.6    $10,570.8    $10,386.0

    Liabilities and Shareholders'
     Equity:
      Policy liabilities                  $1,169.7     $1,079.1     $1,079.8
      Benefit and claim reserves           4,838.3      4,403.5      4,342.5
      Federal income tax payable:
       deferred                              551.6        554.5        557.1
      Debt                                   142.8        143.0        142.7
      Sundry liabilities                     511.4        524.9        472.1
      Shareholders' equity                 4,128.5      3,865.6      3,791.6
          Total                          $11,342.6    $10,570.8    $10,386.0

    Number of shares outstanding       183,225,447  182,563,545  182,335,518




                    Old Republic International Corporation
                         SEGMENTED OPERATING SUMMARY
                               ($ in Millions)

                                    Net      Net
                                  Premiums  Invest-
                                   & Fees    ment   Other Operating  Benefits
               Segment             Earned   Income Income  Revenues  & Claims

    Quarter Ended September 30,
     2005
        General                     $457.4   $49.1   $4.1    $510.7    $306.4
        Mortgage                     107.6    17.2    4.4     129.3      45.6
        Title                        282.0     6.3    0.2     288.6      16.6
        Other                         16.7     5.4    0.1      22.3       7.2
          Consolidated              $863.8   $78.0   $9.0    $951.0    $376.0

    Quarter Ended September 30,
     2004
        General                     $421.3   $45.7   $4.1    $471.1    $278.4
        Mortgage                     102.3    16.9    4.4     123.7      42.3
        Title                        256.9     6.4    0.1     263.6      14.8
        Other                         15.6     3.7    0.2      19.5       8.9
          Consolidated              $796.3   $72.8   $8.9    $878.0    $344.5


    Nine Months Ended September
     30, 2005
        General                   $1,349.9  $144.8  $11.7  $1,506.5    $905.8
        Mortgage                     321.5    52.2   12.8     386.6     113.7
        Title                        775.5    19.1    0.6     795.3      45.8
        Other                         53.3    13.1    0.3      66.8      26.3
          Consolidated            $2,500.4  $229.3  $25.6  $2,755.4  $1,091.8

    Nine Months Ended September
     30, 2004
        General                   $1,194.2  $135.2  $12.3  $1,341.7    $787.8
        Mortgage                     301.5    50.2   14.8     366.6     103.6
        Title                        759.8    18.9    0.8     779.7      44.1
        Other                         48.1    10.1    0.6      58.8      27.1
          Consolidated            $2,303.7  $214.6  $28.6  $2,547.0    $962.7


    Fiscal Twelve Months Ended
     September 30, 2005
        General                   $1,778.7  $193.0  $15.5  $1,987.3  $1,187.5
        Mortgage                     423.2    69.7   16.8     509.8     153.3
        Title                      1,040.9    25.7    0.7   1,067.4      61.5
        Other                         69.8    17.0    0.5      87.4      34.6
          Consolidated            $3,312.8  $305.5  $33.6  $3,652.0  $1,437.0

    Fiscal Twelve Months Ended
     September 30, 2004
        General                   $1,561.7  $179.2  $16.4  $1,757.4  $1,030.0
        Mortgage                     403.4    66.9   19.7     490.1     136.2
        Title                      1,054.4    24.9    0.9   1,080.3      62.8
        Other                         61.1    14.1    0.7      76.0      33.0
          Consolidated            $3,080.8  $285.2  $37.9  $3,404.0  $1,262.2


                                                                Pretax  Comp-
                                                                 Oper-  osite
                                             Sales               ating  Under-
                                            & Other    Total    Income writing
                    Segment                 Expenses  Expenses  (Loss)  Ratios

    Quarter Ended September 30, 2005
         General                              $116.7    $423.1   $87.5  91.5%
         Mortgage                               27.7      73.3    55.9  64.0%
         Title                                 241.2     257.9    30.7  91.3%
         Other                                  13.1      20.4     1.8   ---
           Consolidated                       $398.8    $774.8  $176.1  88.1%

    Quarter Ended September 30, 2004
         General                              $105.4    $383.9   $87.2  90.0%
         Mortgage                               27.6      70.0    53.7  64.0%
         Title                                 227.6     242.4    21.1  94.3%
         Other                                  12.5      21.5    (2.0)  ---
           Consolidated                       $373.3    $717.9  $160.1  88.4%


    Nine Months Ended September 30, 2005
         General                              $341.8  $1,247.6  $258.8  91.4%
         Mortgage                               84.3     198.1   188.5  57.6%
         Title                                 682.9     728.8    66.4  93.8%
         Other                                  43.0      69.3    (2.4)  ---
           Consolidated                     $1,152.1  $2,244.0  $511.3  88.1%

    Nine Months Ended September 30, 2004
         General                              $308.9  $1,096.8  $244.9  90.7%
         Mortgage                               92.3     195.9   170.7  60.1%
         Title                                 670.1     714.2    65.4  93.9%
         Other                                  37.9      65.0    (6.1)  ---
           Consolidated                     $1,109.3  $2,072.0  $474.9  88.0%


    Fiscal Twelve Months Ended September
     30, 2005
         General                              $452.7  $1,640.3  $346.9  91.3%
         Mortgage                              114.1     267.4   242.3  59.2%
         Title                                 942.3   1,003.8    63.5  96.3%
         Other                                  66.2     100.9   (13.5)  ---
           Consolidated                     $1,575.5  $3,012.6  $639.3  89.3%

    Fiscal Twelve Months Ended September
     30, 2004
         General                              $410.0  $1,440.1  $317.2  91.1%
         Mortgage                              121.7     258.0   232.1  59.1%
         Title                                 927.4     990.3    90.0  93.9%
         Other                                  47.5      80.5    (4.5)  ---
           Consolidated                     $1,506.8  $2,769.0  $634.9  88.0%



                    Old Republic International Corporation
                        SEGMENTED OPERATING STATISTICS
                               ($ in Millions)

                                        Quarters Ended      Nine Months Ended
                                         September 30,        September 30,
                                        2005      2004       2005       2004

    General Insurance:
          Benefits and claims ratio     67.0%     66.1%      67.1%      66.0%
          Expense ratio                 24.5%     23.9%      24.3%      24.7%
             Composite ratio            91.5%     90.0%      91.4%      90.7%

          Paid loss ratio               52.7%     50.5%      51.2%      50.9%


    Mortgage Guaranty:
          New insurance written:
            Traditional Primary      $5,553.0  $5,998.0  $15,585.5  $19,080.7
            Bulk                      1,701.1   1,804.9    7,465.9    3,136.1
            Other                        19.8     360.0       63.2    6,801.1
            Total                    $7,274.0  $8,163.0  $23,114.7  $29,018.0

          Net risk in force:
            Traditional Primary                          $14,882.4  $15,474.4
            Bulk                                           1,482.2      813.9
            Other                                            575.8      576.1
            Total                                        $16,940.5  $16,864.4

          Earned premiums: Direct      $127.0    $122.4     $379.7     $360.8
                           Net         $107.6    $102.3     $321.5     $301.5

          Persistency/Traditional
           Primary                                           65.2%      62.8%

          Delinquency ratio:
            Traditional Primary                              4.14%      3.90%
            Bulk                                             3.41%      4.84%

          Claims ratio                  42.4%     41.4%      35.4%      34.4%
          Expense ratio                 21.6%     22.6%      22.2%      25.7%
             Composite ratio            64.0%     64.0%      57.6%      60.1%

          Paid loss ratio               37.5%     34.7%      33.2%      30.0%


    Title Insurance:
          Direct orders opened        104,659    99,248    310,961    315,186
          Direct orders closed         89,293    82,166    253,639    261,464

          Claims ratio                   5.9%      5.8%       5.9%       5.8%
          Expense ratio                 85.4%     88.5%      87.9%      88.1%
             Composite ratio            91.3%     94.3%      93.8%      93.9%

          Paid loss ratio                3.9%      2.9%       4.7%       3.5%
SOURCE Old Republic International Corporation

CONTACT: A.C. Zucaro, Chairman & CEO of Old Republic International Corporation, +1-312-346-8100; or Leslie Loyet, Analysts-Investors, +1-312-640-6672, or lloyet@financialrelationsboard.com , or Tim Grace, Media Inquiries, +1-312-640-6667, or tgrace@financialrelationsboard.com , both of Financial Relations Board