Old Republic's Second Quarter Earnings Growth Driven By Strong Gains In General Insurance; Net Income Enhanced By Special Tax Recovery

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July 25, 2002 at 9:06 AM EDT

Old Republic's Second Quarter Earnings Growth Driven By Strong Gains In General Insurance; Net Income Enhanced By Special Tax Recovery

Consolidated Operating Earnings Reflect Continued Growth of Three Key Segments

Financial Highlights

(unaudited; amounts in millions except per-share data and

percentages; all per-share amounts are stated on a diluted basis)

                        Quarters Ended June 30,   Six Months Ended June 30,
                         2002     2001   Change    2002     2001    Change

    Total Revenues      $657.9   $589.2   11.7% $1,297.0  $1,136.8   14.1%
    Net Operating
     Income             $104.6    $86.0   21.6%   $193.9    $160.5   20.8%
    Net Income          $107.5    $91.5   17.4%   $203.0    $175.5   15.7%
    Diluted Earnings
     Per Share:
    Net Operating
     Income              $0.86    $0.71    21.1%   $1.60     $1.33   20.3%
    Net Income           $0.88    $0.76    15.8%   $1.67     $1.46   14.4%

CHICAGO, July 25 /PRNewswire-FirstCall/ -- Old Republic International Corporation's (NYSE: ORI), consolidated net operating income per share for this year's second quarter grew by 21.1 percent when compared to that posted in the same period of 2001. For the first half of 2002 net operating earnings per share grew by 20.3 percent.

Net Income and Net Operating Income

Net income for the second quarter of 2002 totaled $107.5 million, or 88 cents per share, vs. $91.5 million, or 76 cents per share, for the year-ago quarter. Net operating income, which excludes realized investment gains or losses, was $104.6 million, or 86 cents per share, compared to $86.0 million, or 71 cents per share in the same quarter of 2001.

For this year's first half, net income was $203.0 million, or $1.67 per share, vs. $175.5 million, or $1.46 per share, for the first six months of 2001, while net operating income was $193.9 million, or $1.60 per share in 2002, compared to $160.5 million, or $1.33 per share in 2001.

Second quarter and first half 2002 tax expense was reduced and net earnings were enhanced by tax and related interest recoveries of $10.9 million, or 9 cents per share, due to the favorable resolution of tax issues dating back to the Company's 1987 tax return.

"Consolidated results for the second quarter reflect the continuation of positive General Insurance underwriting trends, and further improvements in Mortgage Guaranty and Title Insurance income," said Al Zucaro, Chairman and Chief Executive Officer.

Consolidated Revenues

Consolidated operating revenues in this year's second quarter totaled $653.5 million, compared to $580.7 million in the same quarter of 2001. Net premiums and fees were $575.6 million in the second quarter vs. $502.5 million in the year-ago period. Consolidated net investment income was $67.7 million for the second quarter of 2002, 1.2 percent lower when compared to the same period of the preceding year.

For the first half of 2002, consolidated operating revenues were $1.28 billion compared to $1.11 billion for the first six months of 2001. Net premiums and fees for the first six months of 2002 were $1.12 billion compared to $958.8 million in the same year-ago period. Consolidated net investment income for this year's first half was $134.8 million, down by 1.6 percent.

General Insurance Group

The Old Republic General Insurance Group, which markets and underwrites commercial property and liability insurance coverages, posted an increase of 24.2 percent in pretax operating income for this year's second quarter to $45.1 million when compared to the same period in 2001. Net premiums earned in the second quarter of 2002 rose by 17.1 percent to $286.3 million, compared to $244.5 million a year ago. The statutory composite underwriting ratio for this year's second quarter was 98.7 percent vs. 101.2 percent in the same quarter one year ago.

For the first six months of 2002, General Insurance pretax operating income totaled $85.3 million vs. $71.5 million for the first six months of 2001, for an increase of 19.2 percent. Net premiums earned were $555.1 million vs. $476.5 million a year ago, and the composite underwriting ratio was 99.4 percent vs. 102.3 percent one year ago. The improved performance in 2002 periods stemmed from slightly lower claim and expense ratios.

Mortgage Guaranty Group

Old Republic's Mortgage Guaranty Group reported a further improvement in underwriting and related services income for the second quarter of 2002. Pretax mortgage guaranty operating income in the second quarter was $71.5 million vs. $65.6 million in the year-ago quarter, an increase of 8.9 percent. Net premiums earned in the quarter were $91.1 million, up 2.8 percent from $88.6 million in the year-ago quarter. The composite underwriting ratio in the second quarter benefited from a lower claim provision, and dropped to 39.6 percent compared to 43.4 percent in the same quarter of 2001.

For this year's first half, pretax mortgage guaranty operating income rose by 11.6 percent to $141.9 million compared to $127.2 million in the first six months of 2001. Net premiums earned totaled $182.7 million, an increase of 4.4 percent from $175.0 million earned in the first half of 2001. The composite underwriting ratio was 40.3 percent compared to 44.9 percent one year earlier. The improvement in the underwriting ratio for this year's first half also stemmed from lower claim provisions.

Title Insurance Group

The Old Republic Title Insurance Group posted slightly higher pretax operating income of $21.3 million in the second quarter of 2002 from $20.5 million a year earlier. Premium and fee revenues rose by 18.8 percent to $188.3 million in this year's second quarter, while operating expenses reflected a similar 19.0 percent increase. Claim provisions were moderately higher quarter over quarter, as was the case in this year's first three months, and reflected mostly a higher premium volume.

For the first half of the year, premium and fee revenues increased by 29.3 percent to $364.8 million vs. $282.1 million in 2001. First half pretax operating income was $41.5 million up 31.8 percent from $31.5 million in the same period last year. Claim and expense ratio trends for this year's first half were affected by the same factor that applied to the year's second quarter.

Life and Health Group

Old Republic's life and health insurance operations, which represent approximately 2 percent of total revenues, benefited from higher travel accident profitability and lower term life claims experience in the second quarter and first six months of this year. Premium revenues declined slightly in this year's second quarter and first six months due to the lower net sales volume in certain specialty products.

Cash, Invested Assets and Shareholders' Equity

Cash and invested assets at June 30, 2002, totaled $5.77 billion, or $47.92 per share, vs. $5.58 billion, or $46.96 per share, at December 31, 2001, and $5.29 billion, or $44.54 per share, at June 30, 2001. Consolidated operating cash flow was positive at approximately $100.0 million in the latest quarter and $249.7 million for the first half of 2002. The investment portfolio reflects a current allocation of approximately 86 percent in fixed- income investments and 8 percent in equities. It contains little or no exposure to real estate investments, mortgage-backed securities, derivatives, junk bonds, private placements or mortgage loans.

Common shareholders' equity was $2.97 billion at June 30, 2002, vs. $2.78 billion at December 31, 2001, and $2.59 billion at June 30, 2001. Book value per share was $24.70 at the end of this year's second quarter, vs. $23.40 at year-end 2001, and $21.83 at June 30, 2001.

Conference Call Information

Old Republic has scheduled a conference calls at 2:00 p.m. Central Time today to discuss its second quarter 2002 performance and review ongoing trends. To access this call, log on to 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 in the property and liability, mortgage guaranty, title and life and health insurance fields. One of the nation's 50 largest publicly owned insurance organizations, Old Republic has assets of approximately $8.20 billion and capitalization of $3.11 billion. Its current stock market valuation is approximately $3.15 billion.

Safe Harbor Statement

Some of the statements made in this News Release and Company published reports, as well as oral statements made by the Company's officials in conference calls following earnings releases, can constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, estimates subject to changes in circumstances, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among other things, changes in (i) general economic and business conditions; (ii) interest rate changes; (iii) competition and the regulatory environment in which the Company operates; (iv) claims frequency and/or severity trends; (v) the number of new and renewal policy applications submitted by the Company's agents or produced directly by the Company's sales staff; and (vi) other factors noted from time to time in the Company's published reports and filings with the Securities and Exchange Commission.

For the latest news releases and other corporate documents on Old Republic International visit: www.oldrepublic.com

                      Old Republic International Corporation
                              FINANCIAL HIGHLIGHTS

                                                 Quarters Ended
                                                    June 30,             %
                                                2002         2001      Change
    NET INCOME:
          Total                             $107,517,961  $91,561,710   17.4%

          Per Share: Basic (a)                     $0.89        $0.77   15.6%

                     Diluted                       $0.88        $0.76   15.8%

    Average number of common and
     equivalent shares outstanding
                     Basic                   120,456,722  118,783,068

                     Diluted                 121,727,917  120,354,542

    COMPOSITION OF EARNINGS PER SHARE:
    Basic Earnings:
          Net income, before items below           $0.87        $0.72   20.8%
          Realized investment gains                 0.02         0.05
              Net income                           $0.89        $0.77   15.6%
    Diluted Earnings:
          Net income, before items below           $0.86        $0.71   21.1%
          Realized investment gains                 0.02         0.05
              Net income                           $0.88        $0.76   15.8%

BOOK VALUE PER SHARE (End of

periods)(b):

          As Reported
          Amortized Cost Basis of Fixed
           Maturity Securities

    SEGMENT INFORMATION ($ in Millions):
    Operating Revenues:
          General                                 $335.1       $294.0   14.0%
          Mortgage Guaranty                        112.2        108.7    3.2%
          Title                                    194.0        164.3   18.1%
          Life & Health                             11.4         12.9  -11.4%
          Other                                      0.6          0.7
              Consolidated Operating
               Revenues                            653.5        580.7   12.5%
    Realized Investment Gains                        4.4          8.4  -47.4%
          Total Revenues                          $657.9       $589.2   11.7%

    Pretax Operating Income (Loss):
          General                                  $45.1        $36.3   24.2%
          Mortgage Guaranty                         71.5         65.6    8.9%
          Title                                     21.3         20.5    4.3%
          Life & Health                              1.7          1.2   43.7%
          Other                                     (2.4)        (3.0)
              Total                                137.3        120.7   13.8%
    Realized Investment Gains                        4.4          8.4  -47.4%
              Revenues, Net of Expenses            141.8        129.2    9.7%
    Income Taxes                                    34.2         38.0   -9.9%
          Net Income                              $107.5        $91.5   17.4%

    Underwriting Ratios:
          General (Statutory)                      98.7%       101.2%
          Mortgage Guaranty (GAAP)                 39.6%        43.4%
          Title (GAAP)                             91.7%        90.8%

(a) Basic earnings per share are calculated after deduction of applicable

        preferred dividend requirements of $667 and $1,334 for the quarter and
        six months ended June 30, 2002, respectively, and $11,118 and $22,236
        for the quarter and six months ended June 30, 2001, respectively.

(b) "As Reported" in financial statements with certain fixed maturity

        securities carried at market value;  the "Amortized Cost" book value
        calculation includes all such securities at their currently amortized
        original  cost.


                      Old Republic International Corporation
                              FINANCIAL HIGHLIGHTS

                                                Six Months Ended
                                                    June 30,             %
                                               2002          2001      Change
    NET INCOME:
          Total                            $203,072,681  $175,529,245   15.7%

          Per Share: Basic (a)                    $1.69         $1.48   14.2%

                     Diluted                      $1.67         $1.46   14.4%

    Average number of common and
     equivalent shares outstanding
                     Basic                  120,431,510   118,774,400

                     Diluted                121,557,490   120,309,880

    COMPOSITION OF EARNINGS PER SHARE:
    Basic Earnings:
          Net income, before items below          $1.61         $1.35   19.3%
          Realized investment gains                0.08          0.13
              Net income                          $1.69         $1.48   14.2%
    Diluted Earnings:
          Net income, before items below          $1.60         $1.33   20.3%
          Realized investment gains                0.07          0.13
              Net income                          $1.67         $1.46   14.4%

    BOOK VALUE PER SHARE (End of
     periods)(b):
          As Reported                            $24.70        $21.83   13.1%
          Amortized Cost Basis of Fixed
           Maturity Securities                   $24.16        $21.68   11.4%

    SEGMENT INFORMATION ($ in Millions):
    Operating Revenues:
          General                                $651.5        $575.1   13.3%
          Mortgage Guaranty                       225.6         214.1    5.4%
          Title                                   376.3         293.8   28.1%
          Life & Health                            28.0          29.2   -3.9%
          Other                                     1.2           1.3
              Consolidated Operating
               Revenues                         1,282.8       1,113.7   15.2%
    Realized Investment Gains                      14.1          23.0  -38.5%
          Total Revenues                       $1,297.0      $1,136.8   14.1%

    Pretax Operating Income (Loss):
          General                                 $85.3         $71.5   19.2%
          Mortgage Guaranty                       141.9         127.2   11.6%
          Title                                    41.5          31.5   31.8%
          Life & Health                             3.3           2.7   21.1%
          Other                                    (4.3)         (6.2)
              Total                               267.7         226.7   18.1%
    Realized Investment Gains                      14.1          23.0  -38.5%
              Revenues, Net of Expenses           281.9         249.8   12.8%
    Income Taxes                                   78.7          75.7    4.1%
          Net Income                             $203.0        $175.5   15.7%

    Underwriting Ratios:
          General (Statutory)                     99.4%        102.3%
          Mortgage Guaranty (GAAP)                40.3%         44.9%
          Title (GAAP)                            91.8%         93.0%

(a) Basic earnings per share are calculated after deduction of applicable

        preferred dividend requirements of $667 and $1,334 for the quarter and
        six months ended June 30, 2002, respectively, and $11,118 and $22,236
        for the quarter and six months ended June 30, 2001, respectively.

(b) "As Reported" in financial statements with certain fixed maturity

        securities carried at market value;  the "Amortized Cost" book value
        calculation includes all such securities at their currently amortized
        original cost.


                    Old Republic International Corporation
                        SUMMARY OF SEGMENT INFORMATION
                                ($ in Millions)

                                                                       Net
                                              Net Premiums & Fees   Investment
                 Segment                     Written       Earned     Income

    Quarter Ended June 30, 2002
         General                              $307.1       $286.3     $43.4
         Mortgage                               91.2         91.1      16.5
         Title                                 188.3        188.3       5.6
         Life                                    8.1          9.8       1.5
         Other                                  ---          ---        0.6
          Total                               $594.9       $575.6     $67.7

    Quarter Ended June 30, 2001
         General                              $270.3       $244.5     $44.4
         Mortgage                               87.1         88.6      15.7
         Title                                 158.4        158.4       5.6
         Life                                    9.1         10.9       1.9
         Other                                  ---          ---        0.7
          Total                               $525.1       $502.5     $68.6


    Six Months Ended June 30, 2002
         General                              $599.9       $555.1     $86.2
         Mortgage                              182.2        182.7      32.8
         Title                                 364.8        364.8      11.1
         Life                                   18.9         24.6       3.2
         Other                                  ---          ---        1.2
          Total                             $1,165.9     $1,127.3    $134.8

    Six Months Ended June 30, 2001
         General                              $517.1       $476.5     $89.1
         Mortgage                              171.9        175.0      31.1
         Title                                 282.1        282.1      11.3
         Life                                   18.3         25.1       3.9
         Other                                  ---          ---        1.3
          Total                               $989.6       $958.8    $137.0


    Fiscal Year Ended June 30, 2002
         General                            $1,161.3     $1,078.9    $172.8
         Mortgage                              364.3        360.9      65.0
         Title                                 708.1        708.1      22.6
         Life                                   47.0         50.1       6.9
         Other                                  ---          ---        5.0
          Total                             $2,280.8     $2,198.1    $272.5

    Fiscal Year Ended June 30, 2001
         General                              $977.7       $913.5    $179.1
         Mortgage                              344.8        344.3      61.6
         Title                                 540.1        540.1      23.4
         Life                                   43.6         49.8       8.2
         Other                                  ---          ---        3.5
          Total                             $1,906.4     $1,847.9    $276.0


                    Old Republic International Corporation
                        SUMMARY OF SEGMENT INFORMATION
                                ($ in Millions)

                                           Other     Operating     Benefits
                 Segment                  Income      Revenues     & Claims

    Quarter Ended June 30, 2002
         General                              $5.2        $335.1      $205.0
         Mortgage                              4.5         112.2        10.6
         Title                                 0.1         194.0         9.1
         Life                                 ---           11.4         5.4
         Other                                ---            0.6        ---
          Total                              $10.0        $653.5      $230.3

    Quarter Ended June 30, 2001
         General                              $4.9        $294.0      $180.9
         Mortgage                              4.3         108.7        14.2
         Title                                 0.2         164.3         6.4
         Life                                 ---           12.9         6.3
         Other                                ---            0.7        ---
          Total                               $9.6        $580.7      $208.0


    Six Months Ended June 30, 2002
         General                             $10.2        $651.5      $402.2
         Mortgage                             10.0         225.6        22.0
         Title                                 0.3         376.3        17.4
         Life                                  0.1          28.0        13.5
         Other                                ---            1.2        ---
          Total                              $20.6      $1,282.8      $455.2

    Six Months Ended June 30, 2001
         General                              $9.5        $575.1      $353.9
         Mortgage                              7.9         214.1        30.6
         Title                                 0.3         293.8        11.1
         Life                                 ---           29.2        14.1
         Other                                ---            1.3        ---
          Total                              $17.8      $1,113.7      $409.8


    Fiscal Year Ended June 30, 2002
         General                             $19.6      $1,271.4      $796.3
         Mortgage                             21.5         447.5        48.4
         Title                                 0.7         731.4        31.4
         Life                                  0.1          57.2        29.6
         Other                                ---            5.0        ---
          Total                              $42.1      $2,512.8      $905.9

    Fiscal Year Ended June 30, 2001
         General                             $19.9      $1,112.6      $686.7
         Mortgage                             12.0         417.9        50.7
         Title                                 0.5         564.1        20.7
         Life                                 ---           58.2        27.8
         Other                                (0.4)          3.1        ---
          Total                              $32.2      $2,156.2      $786.0


                    Old Republic International Corporation
                        SUMMARY OF SEGMENT INFORMATION
                                ($ in Millions)

                                                                     Pretax
                                                                    Operating
                                             Other        Total      Income
                 Segment                   Expenses     Expenses     (Loss)

    Quarter Ended June 30, 2002
         General                             $84.9       $290.0      $45.1
         Mortgage                             30.0         40.7       71.5
         Title                               163.5        172.6       21.3
         Life                                  4.2          9.6        1.7
         Other                                 3.0          3.0       (2.4)
          Total                             $285.8       $516.1     $137.3

    Quarter Ended June 30, 2001
         General                             $76.6       $257.6      $36.3
         Mortgage                             28.7         43.0       65.6
         Title                               137.4        143.8       20.5
         Life                                  5.2         11.6        1.2
         Other                                 3.7          3.7       (3.0)
          Total                             $251.9       $459.9     $120.7


    Six Months Ended June 30, 2002
         General                            $164.0       $566.2      $85.3
         Mortgage                             61.7         83.7      141.9
         Title                               317.3        334.8       41.5
         Life                                 11.1         24.6        3.3
         Other                                 5.5          5.5       (4.3)
          Total                             $559.8     $1,015.0     $267.7

    Six Months Ended June 30, 2001
         General                            $149.6       $503.5      $71.5
         Mortgage                             56.2         86.9      127.2
         Title                               251.1        262.3       31.5
         Life                                 12.3         26.4        2.7
         Other                                 7.6          7.6       (6.2)
          Total                             $477.0       $886.9     $226.7


    Fiscal Year Ended June 30, 2002
         General                            $319.9     $1,116.3     $155.1
         Mortgage                            122.5        170.9      276.6
         Title                               615.2        646.7       84.6
         Life                                 22.0         51.7        5.5
         Other                                11.9         11.9       (6.8)
          Total                           $1,091.7     $1,997.6     $515.2

    Fiscal Year Ended June 30, 2001
         General                            $287.9       $974.7     $137.9
         Mortgage                            110.8        161.5      256.4
         Title                               488.1        508.8       55.3
         Life                                 24.4         52.2        6.0
         Other                                14.1         14.1      (10.9)
          Total                             $925.4     $1,711.5     $444.7

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SOURCE Old Republic International Corporation

CONTACT: A.C. Zucaro, Chairman & CEO of Old Republic, +1-312-346-8100, or General, George Zagoudis, +1-312-640-6663, gzagoudis@webershandwick.com , Analysts-Investors, Leslie Loyet, +1-312-640-6672, lloyet@webershandwick.com , or Media, Tim Grace, +1-312-640-6667, tgrace@webershandwick.com , all of FRB Weber Shandwick