Old Republic Reports Second Quarter Results: Strength in General Insurance and Mortgage Guaranty Drive First Half Earnings Gains

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July 28, 2005 at 9:03 AM EDT

Old Republic Reports Second Quarter Results: Strength in General Insurance and Mortgage Guaranty Drive First Half Earnings Gains

           Shareholders' Equity Reaches A New High Of $4.06 Billion

    CHICAGO, July 28 /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 June 30,  Six Months Ended June 30,
                           2005     2004  Change  2005      2004   Change

    Total Revenues        $944.9  $867.1   9.0% $1,825.2  $1,689.5    8.0%
    Net Operating
     Income               $163.9* $115.7  41.6%   $273.0*   $212.4   28.5%
    Net Income            $172.3* $119.0  44.8%   $286.6*   $225.4   27.2%
    Diluted Earnings
     Per Share:
       Net Operating
        Income             $0.89*  $0.63  41.3%    $1.48*    $1.15   28.7%
    Net Income             $0.93*  $0.65  43.1%    $1.55*    $1.22   27.0%

    Book Value Per Share                          $22.25    $20.07   10.9%

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

Old Republic International Corporation's (NYSE: ORI), consolidated net operating income per share for this year's second quarter was 89 cents, compared to 63 cents in the same period of 2004. For this year's first half, net operating earnings per share amounted to $1.48 versus $1.15 earned in the first six months of 2004.

Earnings for 2005 periods 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 diluted share). As previously announced, 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 in the first half 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

Consolidated results are provided in terms of both net operating income and net income to highlight the impact of certain accounting rules or securities market-driven considerations that affect the recording of investment gains or losses and can lead to lessened period-to-period comparability. The realization of investment gains or losses can be highly discretionary and arbitrary due to such factors as the timing of individual securities sales, 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. In particular, write-downs of securities deemed other than temporarily impaired are affected by some of these factors as well as industry or issuer-specific developments that can call for the recognition of a permanent loss of market value or non-recoverability of asset cost.

Consolidated operating revenues in this year's second quarter totaled $932.1 million, up 8.1 percent from $862.1 million in the same period of 2004. Net premiums and fees earned were $847.6 million in this year's second quarter versus $780.8 million in the year-ago period. Consolidated net investment income of $75.8 million for the second quarter of 2005 was up by 6.5 percent when compared to the preceding year due primarily to the benefits of the Company's growing invested asset base.

For this year's first half, consolidated operating revenues rose by 8.1 percent to $1.80 billion, net premiums and fees by 8.6 percent to $1.63 billion, and net investment income by 6.6 percent to $151.2 million, all in relation to corresponding amounts posted in the first six months of 2004.

    The major components of Old Republic's consolidated pretax operating
income cited herein, and consolidated GAAP net income were as follows for the
periods shown:

                                         ($ in Millions Except Share Data)
                                        Quarters Ended      Six Months Ended
                                          June 30,            June 30,
                                       2005      2004      2005      2004

    Pretax operating income (loss):
      General                         $86.4     $83.3    $171.3    $157.6
      Mortgage Guaranty                67.9      59.5     132.5     116.9
      Title                            22.8      31.0      35.6      44.3
      Corporate and other              (2.6)     (1.6)     (4.3)     (4.1)

    Realized investment gains (losses):
      From sales                       12.9       4.9      26.0      20.5
      From impairments                  (.1)        -      (5.2)        -
        Sub-total                      12.8       4.9      20.8      20.5
    Consolidated pretax income        187.5     177.2     356.0     335.3
      Income taxes                     15.2      58.1      69.4     109.9
    Net income                       $172.3    $119.0    $286.6    $225.4

    Components of diluted earnings
     per share:
      Net Operating Income before
       non-recurring income tax
       benefit                        $0.64     $0.63     $1.23     $1.15
      Non-recurring income tax
       benefit                         0.25         -      0.25         -
      Net operating income             0.89      0.63      1.48      1.15
      Net realized gains               0.04      0.02      0.07      0.07
      Net income                      $0.93     $0.65     $1.55     $1.22


    General Insurance Group Results

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

                                             ($ in Millions)
                                 Quarters Ended          Six Months Ended
                                    June 30,                 June 30,
                            2005    2004   Change    2005    2004   Change

    Net premiums earned   $461.3  $396.2    16.4%  $892.4   $772.8   15.5%
    Net investment income   47.8    45.0     6.3     95.7     89.5    6.9
    Pretax operating
     income                $86.4   $83.3     3.8%  $171.3   $157.6    8.7%

    Benefits and claims
     ratio                  67.0%   65.4%            67.2%    66.2%
    Expense ratio           24.4    23.8             24.5     24.8
    Composite ratio         91.4%   89.2%            91.7%    91.0%

General insurance operations registered year-over-year earned premium growth in the mid-teens for both 2005 periods. Favorable underwriting results continue and reflect basically stable overall claim costs as well as firm expense controls. Net investment income growth resulted from reasonably stable investment yields on a greater invested asset base.

Mortgage Guaranty Group Results

Old Republic's Mortgage Guaranty Group performed within expectations for the first half of 2005. The following performance indicators reflect steadily improving results for this segment.

                                           ($ in Millions)
                               Quarters Ended       Six Months Ended
                                  June 30,              June 30,
                            2005    2004  Change    2005     2004 Change

    Net premiums earned   $108.5  $100.4     8.1%  $213.9   $199.1    7.4%
    Net investment income   17.4    16.7     4.5     35.0     33.3    5.0
    Pretax operating
     income                $67.9   $59.5    14.2%  $132.5   $116.9   13.3%


    Claims ratio            31.5%   32.0%            31.9%    30.8%
    Expense ratio           22.0    25.4             22.5     27.3
    Composite ratio         53.5%   57.4%            54.4%    58.1%

Most of the improvement in mortgage guaranty operations stemmed from the basic underwriting and related services function of the business. Year-over- year claim ratio comparisons reflect basic stability in paid loss trends, claim frequency and severity patterns, all of which appear to have leveled off in the three most recent quarters. Profitability was also affected favorably by the combination of lower contract underwriting costs, some reductions in variable sales expenses, and continued attention to operating efficiencies. Year-over-year expense comparisons also benefited from the absence of stock option expense acceleration costs of $2.0 million that burdened first half 2004 operations to the extent of 100 basis points in the expense ratio.

Title Insurance Group Results

    Old Republic's Title Insurance segment turned in somewhat poorer results
than anticipated at the beginning of the year.  Major indicators of that
performance follow:

                                            ($ in Millions)
                               Quarters Ended            Six Months Ended
                                  June 30,                   June 30,
                            2005    2004    Change   2005     2004  Change

    Net premiums and
     fees earned           $261.7  $268.7    -2.6%  $493.4   $502.8   -1.9%
    Net investment income     6.4     6.2     2.1     12.7     12.5    2.1

    Pretax operating
     income                 $22.8   $31.0   -26.4%   $35.6    $44.3  -19.5%

    Claims ratio              5.9%    5.7%             5.9%     5.8%
    Expense ratio            87.7    85.0             89.4     87.8
        Composite ratio      93.6%   90.7%            95.3%    93.6%

All of the shortfall in this year's title operating income stemmed from the basic underwriting and related services operations. While claim costs remained relatively stable, operating expense reductions have been more difficult to achieve in the light of slightly negative premium and fee revenue trends. Indicative of the drop in title premium and fee revenues, the number of closed transactions for the Company's directly produced business were 6.6 percent and 9.8 percent lower in this year's first and second quarter, respectively, and 8.3 percent less in the first half of the year when compared to the same periods of 2004. These reduced production levels are generally attributable to a continued drop in refinance transactions, as well as more subdued new and resale housing activity in 2005 to date.

Corporate and Other Operations

Combined results for Old Republic's small life and health insurance business and net corporate expenses reflected pretax net operating deficits of $2.6 million and $4.3 million in the second quarter and first half of 2005, respectively. For the second quarter and first half of 2004, the comparable operating deficits amounted to $1.6 million and $4.1 million, respectively. These results are reflective of holding company expenses and debt service costs, investment income on temporary investment holdings, and lower earnings from Old Republic's overall book of term 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 common shareholders' equity along with the corresponding per share amounts as of the dates shown:

                                         ($ in Millions Except Share Data)
                                           June 30,    Dec. 31,  June 30,
                                             2005        2004      2004

    Total Cash and Invested Assets        $7,762.2   $7,519.5   $7,084.6
    Total Cash and Invested Assets
     Per Share                              $42.44     $41.19     $38.90
    Total Common Shareholders' Equity     $4,068.9   $3,865.6   $3,655.0
    Book Value Per Share                    $22.25     $21.17     $20.07

Consolidated operating cash flow continued positive at $371.2 million for the first half of 2005, compared to $412.7 million in the same period of 2004. The investment portfolio reflects a current allocation of approximately 88 percent in fixed-income investments and 5 percent in equities. It contains little or no exposure to real estate investments, mortgage-backed securities, derivatives, junk bonds, private placements or mortgage loans.

Conference Call Information

Old Republic has scheduled a conference call at 2:00 p.m. Central Time today to discuss its second quarter 2005 performance and review ongoing trends. To access this call, log on to http://www.oldrepublic.com 15 minutes before the call to download the necessary software. A replay 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, principally 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 $11.0 billion and capitalization of $4.2 billion. Its current stock market valuation is approximately $4.7 billion.

Safe Harbor Statement

Historical data pertaining to the operating performance, liquidity, and other financial 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 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. Any such forward-looking statements, commentaries, or inferences, of necessity, 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 impacted 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


                    Old Republic International Corporation
                             FINANCIAL HIGHLIGHTS

                                                     Quarters Ended
                                                       June 30,
                                                  2005        2004      Change
    NET INCOME:
          Total                            $172,303,518  $119,015,777   44.8%

          Per Share:   Basic                      $0.94         $0.65   44.6%

                       Diluted                    $0.93         $0.65   43.1%

    Average number of common and
     equivalent shares outstanding
                       Basic                182,903,826   182,123,337

                       Diluted              184,952,330   184,218,883

    COMPOSITION OF EARNINGS PER SHARE:
    Basic Earnings:
          Net income, before items below          $0.90         $0.63   42.9%
          Realized investment gains                0.04          0.02
              Net income                          $0.94         $0.65   44.6%
    Diluted Earnings:
          Net income, before items below          $0.89         $0.63   41.3%
          Realized investment gains                0.04          0.02
              Net income                          $0.93         $0.65   43.1%

    BOOK VALUE PER SHARE (End of periods)(a):
          As Reported
          Cost Basis

    FINANCIAL SUMMARY ($ in Millions):
    Operating Revenues:
          General                                $513.2        $445.1   15.3%
          Mortgage Guaranty                       130.3         122.7    6.2%
          Title                                   268.2         275.4   -2.6%
          Corporate & Other                        20.3          18.8
              Consolidated Operating
               Revenues                           932.1         862.1    8.1%
    Realized Investment Gains                      12.8           4.9
          Total Revenues                         $944.9        $867.1    9.0%

    Pretax Operating Income (Loss):
          General                                 $86.4         $83.3    3.8%
          Mortgage Guaranty                        67.9          59.5   14.2%
          Title                                    22.8          31.0  -26.4%
          Corporate & Other                        (2.6)         (1.6)
              Total                               174.6         172.2    1.4%
    Realized Investment Gains                      12.8           4.9
              Revenues, Net of Expenses           187.5         177.2    5.8%
    Income Taxes                                   15.2          58.1  -73.9%
          Net Income                             $172.3        $119.0   44.8%


                                                   Six Months Ended
                                                       June 30,
                                                 2005         2004     Change
    NET INCOME:
          Total                            $286,634,222  $225,429,094   27.2%

          Per Share:  Basic                       $1.56         $1.24   25.8%

                      Diluted                     $1.55         $1.22   27.0%

    Average number of common and
     equivalent shares outstanding
                      Basic                 182,893,037   182,118,799

                      Diluted               184,913,845   184,387,307

    COMPOSITION OF EARNINGS PER SHARE:
    Basic Earnings:
          Net income, before items below          $1.49         $1.17   27.4%
          Realized investment gains                0.07          0.07
              Net income                          $1.56         $1.24   25.8%
    Diluted Earnings:
          Net income, before items below          $1.48         $1.15   28.7%
          Realized investment gains                0.07          0.07
              Net income                          $1.55         $1.22   27.0%

    BOOK VALUE PER SHARE (End of periods)(a):
          As Reported                            $22.25        $20.07   10.9%
          Cost Basis                             $21.50        $19.30   11.4%

    FINANCIAL SUMMARY ($ in Millions):
    Operating Revenues:
          General                                $995.8        $870.6   14.4%
          Mortgage Guaranty                       257.3         242.9    5.9%
          Title                                   506.6         516.1   -1.8%
          Corporate & Other                        44.5          39.3
              Consolidated Operating
               Revenues                         1,804.4       1,668.9    8.1%
    Realized Investment Gains                      20.8          20.5
          Total Revenues                       $1,825.2      $1,689.5    8.0%

    Pretax Operating Income (Loss):
          General                                $171.3        $157.6    8.7%
          Mortgage Guaranty                       132.5         116.9   13.3%
          Title                                    35.6          44.3  -19.5%
          Corporate & Other                        (4.3)         (4.1)
              Total                               335.2         314.8    6.5%
    Realized Investment Gains                      20.8          20.5
              Revenues, Net of Expenses           356.0         335.3    6.2%
    Income Taxes                                   69.4         109.9  -36.8%
          Net Income                             $286.6        $225.4   27.2%


    (a) "As Reported" in financial statements with all securities carried at
        market value.  "Cost Basis" calculation includes all investment
        securities at their currently amortized original cost.



                    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 June 30, 2005
        General                     $461.3   $47.8   $4.0    $513.2    $311.2
        Mortgage                     108.5    17.4    4.2     130.3      34.2
        Title                        261.7     6.4    0.1     268.2      15.3
        Other                         16.0     4.1    0.1      20.3       8.6
          Consolidated              $847.6   $75.8   $8.5    $932.1    $369.4

    Quarter Ended June 30, 2004
        General                     $396.2   $45.0   $3.8    $445.1    $260.1
        Mortgage                     100.4    16.7    5.6     122.7      32.1
        Title                        268.7     6.2    0.4     275.4      15.3
        Other                         15.4     3.2    0.1      18.8       8.4
          Consolidated              $780.8   $71.2  $10.0    $862.1    $316.0


    Six Months Ended June 30, 2005
        General                     $892.4   $95.7   $7.6    $995.8    $599.4
        Mortgage                     213.9    35.0    8.3     257.3      68.1
        Title                        493.4    12.7    0.3     506.6      29.1
        Other                         36.6     7.6    0.2      44.5      19.0
          Consolidated            $1,636.5  $151.2  $16.5  $1,804.4    $715.8

    Six Months Ended June 30, 2004
        General                     $772.8   $89.5   $8.2    $870.6    $509.4
        Mortgage                     199.1    33.3   10.4     242.9      61.2
        Title                        502.8    12.5    0.6     516.1      29.3
        Other                         32.5     6.4    0.3      39.3      18.2
          Consolidated            $1,507.4  $141.8  $19.7  $1,668.9    $618.1


    Fiscal Twelve Months Ended
     June 30, 2005
        General                   $1,742.6  $189.6  $15.4  $1,947.8  $1,159.5
        Mortgage                     418.0    69.4   16.8     504.3     150.1
        Title                      1,015.8    25.8    0.6   1,042.3      59.6
        Other                         68.7    15.3    0.5      84.6      36.2
          Consolidated            $3,245.2  $300.3  $33.5  $3,579.1  $1,405.6

    Fiscal Twelve Months Ended
     June 30, 2004
        General                   $1,499.4  $176.5  $17.2  $1,693.2    $994.0
        Mortgage                     401.2    66.2   24.7     492.2     117.1
        Title                      1,105.9    24.4    0.9   1,131.3      65.2
        Other                         56.0    14.2    0.6      70.9      30.6
          Consolidated            $3,062.6  $281.5  $43.5  $3,387.7  $1,207.0


                                                             Pretax  Composite
                                            Sales           Operating  Under-
                                           & Other   Total   Income   writing
        Segment                            Expenses Expenses  (Loss)   Ratios

    Quarter Ended June 30, 2005
         General                             $115.4   $426.7   $86.4    91.4%
         Mortgage                              28.1     62.3    67.9    53.5%
         Title                                230.0    245.3    22.8    93.6%
         Other                                 14.3     22.9    (2.6)    ---
           Consolidated                      $387.9   $757.4  $174.6    87.6%

    Quarter Ended June 30, 2004
         General                             $101.6   $361.8   $83.3    89.2%
         Mortgage                              31.1     63.2    59.5    57.4%
         Title                                228.9    244.3    31.0    90.7%
         Other                                 12.1     20.5    (1.6)    ---
           Consolidated                      $373.8   $689.8  $172.2    86.4%


    Six Months Ended June 30, 2005
         General                             $225.0   $824.4  $171.3    91.7%
         Mortgage                              56.5    124.7   132.5    54.4%
         Title                                441.7    470.9    35.6    95.3%
         Other                                 29.8     48.9    (4.3)    ---
           Consolidated                      $753.2 $1,469.1  $335.2    88.0%

    Six Months Ended June 30, 2004
         General                             $203.4   $712.9  $157.6    91.0%
         Mortgage                              64.6    125.9   116.9    58.1%
         Title                                442.5    471.8    44.3    93.6%
         Other                                 25.3     43.5    (4.1)    ---
           Consolidated                      $735.9 $1,354.1  $314.8    87.8%


    Fiscal Twelve Months Ended
     June 30, 2005
         General                             $441.5 $1,601.1  $346.7    91.1%
         Mortgage                             113.9    264.1   240.1    59.1%
         Title                                928.7    988.4    53.9    97.2%
         Other                                 65.7    102.0   (17.3)    ---
           Consolidated                    $1,550.0 $2,955.6  $623.4    89.3%

    Fiscal Twelve Months Ended
     June 30, 2004
         General                             $404.4 $1,398.4  $294.8    91.8%
         Mortgage                             127.5    244.6   247.5    54.8%
         Title                                954.1  1,019.5   111.8    92.1%
         Other                                 46.5     77.2    (6.1)    ---
           Consolidated                    $1,532.6 $2,739.7  $648.0    87.4%



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

                                       Quarters Ended       Six Months Ended
                                          June 30,               June 30,
                                       2005       2004       2005       2004

    General Insurance:
          Benefits and claims ratio    67.0%      65.4%      67.2%      66.2%
          Expense ratio                24.4%      23.8%      24.5%      24.8%
             Composite ratio           91.4%      89.2%      91.7%      91.0%

          Paid loss ratio              51.4%      51.3%      50.5%      51.1%


    Mortgage Guaranty:
          New insurance written:
           Traditional Primary      $5,326.8   $7,183.1  $10,032.4  $13,082.7
           Bulk                      2,465.2    1,290.0    5,764.8    1,331.1
           Other                         3.5    5,276.0       43.4    6,441.1
           Total                    $7,795.7  $13,749.2  $15,840.7  $20,855.0

          Net risk in force:
           Traditional Primary                           $15,126.5  $15,322.5
           Bulk                                            1,203.9      792.2
           Other                                             576.2      548.5
           Total                                         $16,906.7  $16,663.3

          Earned premiums: Direct     $128.1     $119.8     $252.7     $238.3
                           Net        $108.5     $100.4     $213.9     $199.1

          Persistency/Traditional
           Primary                                           66.6%      54.8%

          Delinquency ratio:
           Traditional Primary                               3.82%      3.65%
           Bulk                                              3.25%      5.12%

          Claims ratio                 31.5%      32.0%      31.9%      30.8%
          Expense ratio                22.0%      25.4%      22.5%      27.3%
             Composite ratio           53.5%      57.4%      54.4%      58.1%

          Paid loss ratio              30.6%      30.4%      31.1%      27.6%


    Title Insurance:
          Direct orders opened       107,277    103,866    206,302    215,938
          Direct orders closed        87,228     96,719    164,346    179,298

          Claims ratio                  5.9%       5.7%       5.9%       5.8%
          Expense ratio                87.7%      85.0%      89.4%      87.8%
             Composite ratio           93.6%      90.7%      95.3%      93.6%

          Paid loss ratio               5.2%       3.3%       5.1%       3.8%
SOURCE Old Republic International Corporation

CONTACT: A.C. Zucaro, Chairman & CEO of Old Republic, +1-312-346-8100, or General Information, George Zagoudis, +1-312-640-6663, gzagoudis@financialrelationsboard.com , Analysts-Investors, Leslie Loyet, +1-312-640-6672, lloyet@financialrelationsboard.com , or Media Inquiries, Tim Grace, +1-312-640-6667, tgrace@financialrelationsboard.com , all of the Financial Relations Board