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Old Republic Reports Results for The Fourth Quarter and Full Year 2018

CHICAGO, Jan. 24, 2019 /PRNewswire/ -- Old Republic International Corporation (NYSE: ORI) today reported the following consolidated results (a):






Quarters Ended December 31,


Years Ended December 31,


2018


2017


2018


2017

Pretax income (loss)

$

(137.5)


$

354.7


$

438.1


$

725.4

Pretax investment gains (losses) included in pretax income (loss)

(308.2)


154.0


(235.6)


211.6

Pretax income (loss) excluding investment gains (losses)

$

170.6


$

200.6


$

673.7


$

513.8









Net income (loss)

$

(106.5)


$

299.6


$

370.5


$

560.5

Net of tax investment gains (losses) included in net income (loss)

(243.3)


205.1


(185.9)


242.4

Net income (loss) excluding investment gains (losses)

$

136.8


$

94.5


$

556.4


$

318.0

As noted on pages 2 and 3, performance comparisons among the periods reported upon are affected by two significant events in 2018, and by special operating charges and deferred tax adjustments in 2017. The components of consolidated net income (loss) shown in the above table are also reflected on a per share basis in the Financial Highlights below.


FINANCIAL HIGHLIGHTS (a)




Quarters Ended December 31,


Years Ended December 31,




2018


2017


Change


2018


2017


Change



SUMMARY INCOME STATEMENTS:














Revenues:














Net premiums and fees earned

$

1,448.4



$

1,442.4



0.4

%


$

5,703.9



$

5,539.7



3.0

%



Net investment income

110.3



103.7



6.3



431.8



409.4



5.5




Other income

30.4



25.9



17.2



121.6



102.2



18.9




  Total operating revenues

1,589.1



1,572.1



1.1



6,257.4



6,051.5



3.4




Investment gains (losses):














Realized from actual transactions

3.3



154.0





58.2



211.6






Unrealized from changes in fair value of equity securities

(311.6)







(293.8)








Total investment gains (losses)

(308.2)



154.0





(235.6)



211.6






  Total revenues

1,280.9



1,726.2





6,021.8



6,263.1






Operating expenses:














Claim costs

639.9



534.1



19.8



2,460.7



2,478.8



-0.7




Sales and general expenses

770.6



822.6



-6.3



3,080.6



2,995.7



2.8




Interest and other charges

7.8



14.7



-46.5



42.2



63.0



-33.0




  Total operating expenses

1,418.0



1,371.5



3.4

%


5,583.7



5,537.7



0.8

%



Pretax income (loss)

(137.5)



354.7





438.1



725.4






Income taxes (credits)

(31.0)



55.0





67.5



164.8






Net income (loss)

$

(106.5)



$

299.6





$

370.5



$

560.5


































COMMON STOCK STATISTICS:














Net income (loss) per share: Basic

$

(0.36)



$

1.13





$

1.26



$

2.14






                                                 Diluted

$

(0.36)



$

1.01





$

1.24



$

1.92






Components of net income (loss) per share:














Basic net income (loss) excluding investment gains (losses)

$

0.45



$

0.36





$

1.89



$

1.21






Net investment gains (losses):














Realized from actual transactions

0.01



0.77





0.16



0.93






Unrealized from changes in fair value of equity securities

(0.82)







(0.79)








Basic net income (loss)

$

(0.36)



$

1.13





$

1.26



$

2.14






Diluted net income (loss) excluding investment gains (losses)

$

0.45



$

0.33





$

1.86



$

1.11






Net investment gains (losses):














Realized from actual transactions

0.01



0.68





0.15



0.81






Unrealized from changes in fair value of equity securities

(0.82)







(0.77)








Diluted net income (loss)

$

(0.36)



$

1.01





$

1.24



$

1.92






Cash dividends on common stock

$

0.1950



$

1.1900





$

0.7800



$

1.7600






Book value per share







$

17.23



$

17.72



-2.8

%

















Common shares outstanding: Average basic

299,080,914


264,041,834


13.3

%


294,248,871


262,114,533


12.3

%



Average diluted

299,080,914


300,846,014


-0.6

%


301,016,076


299,387,373


0.5

%



Actual, end of period







302,714,502


269,238,727


12.4

%



__________________














(a) All amounts in this report are stated in millions except common stock data and percentages.

 


















Effective January 1, 2018, two significant events transpired that have a bearing on the year-over-year comparability of consolidated pretax and net income. One arises from a rule of the Financial Accounting Standards Board ("FASB") that requires the inclusion of unrealized investment gains or losses emanating from changes in the fair value of equity (but not fixed maturity) securities in the determination of pre and post-tax income. The second relates to a reduction in nominal Federal corporate income tax rates from 35% to 21%. The impact of the 2018 rate change on the reported 2017 effective tax rates is discussed at the bottom of this page.

The realization of investment gains or losses can be highly discretionary and can be affected by such randomly occurring factors as the timing of individual securities sales, the recording of estimated losses from write-downs of impaired securities, tax-planning and tax-rate change considerations, and modifications of investment management judgments regarding the direction of securities markets or the future prospects of individual investees or industry sectors. The inclusion, starting in 2018, of securities market-driven changes in equity investments' valuations will most likely produce, as it has in 2018, greater period-to-period fluctuations in reported net income, particularly at times of significant instability or volatility in such markets. This accounting change, however, has no effect, on the determination of such critical elements as current income taxes, debt-to-equity ratios, shareholders' equity, or, most importantly, the conduct of insurance subsidiaries' operations and their ability to pay dividends to the ORI holding company parent.

The Financial Highlights table on page 1 shows the components of consolidated pretax and net income to reflect the impact that total realized and, beginning in 2018, unrealized investment gains or losses of equity securities have on period-to-period comparisons. Management uses income exclusive of all investment gains (losses) to analyze, evaluate, and establish accountability for the results of Old Republic's basic insurance operating performance. Net income, however, is the measure of total profitability according to the tenets of generally accepted accounting principles ("GAAP").

The table on the following page presents the major segmented elements of the Company's financial performance. This reflects: 1) the above-cited significant events for 2018, and 2) the special operating charges for the fourth quarter and full year 2017 which consisted of: (a) General insurance claims provisions ($(12.0) million and $8.0 million for the fourth quarter and year ended December 31, 2017, respectively) associated with then current evaluations of hurricane claim exposures, (b) additional claim and related expense provisions ($130.0 million for the year 2017) applicable to final settlements and probable dispositions of all known litigated and other claims costs incurred by the Company's RFIG run-off business during the Great Recession years and their aftermath, (c) charges for additional 2017 estimated employee incentive awards ($32.3 million for both the fourth quarter and year ended December 31, 2017), and (d) adjustment of previously estimated life insurance reserves and cost assumptions ($9.5 million for both the fourth quarter and year ended December 31, 2017).

In the table on the following page, the amounts shown for: (1) underwriting and related services income (loss) represent net premiums, fees, and other income reduced by claim costs and sales and general expenses; and (2) segmented and consolidated pretax income (loss), excluding investment gains (losses), represent the combination of underwriting and related services income (loss) and net investment income, reduced by interest and other charges.

In general, taxable income stemming from: (a) underwriting and related services, and (b) investments in corporate and federal government debt securities are taxed at the nominal tax rates in effect during the reporting periods, while income emanating from: (c) investments in states' and their subdivisions' debt securities, and (d) dividends from equity securities are taxed at a reduced nominal tax rate. The table below shows the effective consolidated income tax rates which result from application of such nominal or nominally-adjusted tax rates to these various components of taxable income.


Quarters Ended


Years Ended


December 31,


December 31,




2017




2017


2018


As Reported


As Adjusted*


2018


As Reported


As Adjusted*

Net income (loss)

(22.6)%


15.5%


33.3%


15.4%


22.7%


31.4%

Realized investment












gains (losses)

22.2%


(33.1)%


35.0%


21.1%


(14.6)%


35.0%

Unrealized investment












gains (losses)

(21.1)%


N/A


N/A


(21.1)%


N/A


N/A

Net income (loss) excluding












investment gains (losses)

19.8%


52.9%


32.1%


17.4%


38.1%


30.0%

________________                              

*

In the final quarter of 2017, deferred income tax adjustments were made as required to reflect the lower Federal income tax rates which took effect at the beginning of 2018. The adjustments amounted to a deferred income tax charge of $41.8 applied to income excluding investment gains or losses, and a deferred income tax credit of $104.9 applied to investment gains or losses. The 2017 As Adjusted effective income tax rates in the above table reflect the exclusion of such required adjustments.

 


Major Segmented and Consolidated Elements of Income (Loss)


Quarters Ended December 31,


Years Ended December 31,


2018


2017


Change


2018


2017


Change

Net premiums, fees, and other income:












General insurance

$

835.7



$

797.1



4.8

%


$

3,277.1



$

3,110.8



5.3

%

Title insurance

592.5



616.6



-3.9



2,336.1



2,287.2



2.1


Corporate and other

3.4



4.3



-21.4



14.6



18.8



-22.0


Other income

30.4



25.9



17.2



121.6



102.2



18.9


Subtotal

1,462.1



1,444.1



1.2



5,749.5



5,519.1



4.2


RFIG run-off business

16.6



24.2



-31.1



75.9



122.9



-38.2


Consolidated total

$

1,478.8



$

1,468.3



0.7

%


$

5,825.5



$

5,642.0



3.3

%

Underwriting and related services income (loss):











General insurance

$

13.2



$

58.9



-77.6

%


$

91.2



$

84.3



8.2

%

Title insurance

52.5



56.0



-6.3



185.1



206.7



-10.5


Corporate and other (a)

(4.5)



(12.9)



64.7



(21.9)



(28.4)



22.7


Subtotal

61.1



102.0



-40.1



254.3



262.6



-3.2


RFIG run-off business

7.0



9.5



-25.5



29.7



(95.2)



131.2


Consolidated total

$

68.2



$

111.5



-38.9

%


$

284.0



$

167.3



69.7

%

Consolidated composite ratio:












Claim ratio

44.2

%


37.0

%




43.1

%


44.7

%



Expense ratio

50.9



55.0





51.6



52.0




Composite ratio

95.1

%


92.0

%




94.7

%


96.7

%



Net investment income:












General insurance

$

87.2



$

80.9



7.8

%


$

341.0



$

318.9



6.9

%

Title insurance

10.0



9.3



6.8



38.8



37.3



4.2


Corporate and other

8.3



8.1



2.3



31.7



31.4



1.2


Subtotal

105.5



98.4



7.2



411.7



387.7



6.2


RFIG run-off business

4.7



5.3



-10.7



20.1



21.7



-7.2


Consolidated total

$

110.3



$

103.7



6.3

%


$

431.8



$

409.4



5.5

%

Interest and other charges:












General insurance

$

15.6



$

15.6





$

68.3



$

62.9




Title insurance

1.3



1.1





4.6



6.9




Corporate and other (b)

(9.0)



(2.1)





(30.6)



(6.9)




Subtotal

7.8



14.7





42.2



63.0




RFIG run-off business












Consolidated total

$

7.8



$

14.7



-46.5

%


$

42.2



$

63.0



-33.0

%

Segmented and consolidated pretax income












 (loss) excluding investment gains (losses):












General insurance

$

84.8



$

124.1



-31.7

%


$

363.9



$

340.3



6.9

%

Title insurance

61.1



64.2



-4.8



219.3



237.1



-7.5


Corporate and other

12.8



(2.5)



N/M


40.4



9.9



N/M

Subtotal

158.8



185.8



-14.5



623.8



587.3



6.2


RFIG run-off business

11.8



14.8



-20.1



49.9



(73.5)



167.9


Consolidated pretax income (loss) excluding












 investment gains (losses)

170.6



200.6



-14.9

%


673.7



513.8



31.1

%

Income taxes (credits) on above (c)

33.8



106.0





117.2



195.7




Net income (loss) excluding












 investment gains (losses)

136.8



94.5





556.4



318.0




Consolidated pretax investment gains (losses):












Realized from actual transactions

3.3



154.0





58.2



211.6




Unrealized from changes in fair value of












 equity securities

(311.6)







(293.8)






Consolidated realized and unrealized












  investment gains (losses)

(308.2)



154.0





(235.6)



211.6




Income taxes (credits) on investment












 gains (losses) (c)

(64.8)



(51.0)





(49.6)



(30.8)




Net of tax investment gains (losses)

(243.3)



205.1





(185.9)



242.4




Net income (loss)

$

(106.5)



$

299.6





$

370.5



$

560.5




Net operating cash flows:












Consolidated







$

760.5



$

452.8



68.0

%

Exclusive of RFIG run-off business







$

837.0



$

765.3



9.4

%

____________

(a) Includes general administrative expenses. / (b) Includes net external and internal debt interest costs and consolidation/elimination entries. / (c) See the table at the bottom of page 2 for information about year-end 2017 deferred tax adjustments.

 

General Insurance Segment Results - The table below reflects the major elements affecting this segment's financial performance for the periods shown.

 


General Insurance Business Segment


Quarters Ended December 31,


Years Ended December 31,


2018


2017


Change


2018


2017


Change

Net premiums earned

$

835.7


$

797.1


4.8

%


$

3,277.1


$

3,110.8


5.3

%

Net investment income

87.2


80.9


7.8



341.0


318.9


6.9


Other income

30.7


26.0


18.2



121.3


101.8


19.1


Operating revenues

953.7


904.0


5.5



3,739.4


3,531.6


5.9


Claim costs (a)

626.5


524.9


19.3



2,365.8


2,234.4


5.9


Sales and general expenses

226.8


239.2


-5.2



941.3


893.8


5.3


Interest and other charges

15.6


15.6




68.3


62.9


8.5


Operating expenses

868.9


779.9


11.4



3,375.5


3,191.3


5.8


Segment pretax operating income (loss) (b)

$

84.8


$

124.1


-31.7

%


$

363.9


$

340.3


6.9

%


















Claim ratio

75.0

%


65.9

%





72.2

%


71.8

%



Expense ratio

23.5



26.8






25.0



25.5




Composite ratio

98.5

%


92.7

%





97.2

%


97.3

%



____________

(a) 

General insurance pretax results for the quarter and year ended December 31, 2017 include hurricane-related claim costs of $(12.0) and $8.0, respectively.



(b) 

In connection with the run-off mortgage guaranty ("MI") and consumer credit indemnity ("CCI") combination, $3.0 and $3.8 of pretax operating income for the fourth quarter and year 2018, and $1.8 and $(121.1) of pretax operating income (loss) for the fourth quarter and year 2017, respectively, were retained by certain general insurance companies pursuant to various quota share and stop loss reinsurance agreements. All of these amounts, however, have been reclassified such that 100% of the CCI run-off business is reported in the RFIG run-off segment.

With few exceptions, earned premiums grew for most types of coverages and markets served. The cumulative effects of recent years' and ongoing premium rate increases for several insurance products, along with new business production were main contributors to premium growth. The greater premium levels stemmed principally from commercial automobile (trucking), national accounts, executive indemnity, auto warranties, and the various coverages offered by a new underwriting facility established in early 2015. Net investment income gained in the context of a slightly higher invested asset base and relatively stable yield environment.

As the table below indicates, claim ratios have been on a fairly consistent downtrend during the past five years. The improvement has arisen from slightly lower estimates of current accident years' claim provisions, and by the lessening impacts from developments of prior years' reserve estimates. The claim ratio increase in 2018's final quarter resulted from recurring fiscal twelve month reserve evaluations of current and prior years' developing claim experience. Substantially all of this increase stemmed from the past decade's new books of business that are subject to ongoing adjustments to the underwriting and claim management processes.






Effect of Prior Periods'










(Favorable)/


Claim Ratio Excluding


Reported


Unfavorable Claim


Prior Periods' Claim


Claim Ratio


Reserves Development


Reserves Development

2014


77.9%




3.9%




74.0%


2015


74.1




1.5




72.6


2016


73.0




0.3




72.7


2017


71.8




0.7




71.1


2018


72.2%




—%




72.2%


4th Quarter 2017


65.9%




(2.4)%




68.3%


4th Quarter 2018


75.0%




(0.9)%




75.9%


As the above table shows, year-over-year operating expenses have remained aligned with earned premiums trends.

Quarterly and even annual claim provisions and the trends they display may not be particularly meaningful indicators of future outcomes for Old Republic's liability-oriented mix of business. Absent significant economic and insurance industry dislocations in the foreseeable future, it is currently anticipated that reported claim ratios can be expected to fall within targeted averages in the high 60 to low 70 percent range. The current mix of business should reflect an expense ratio ranging between 23 and 25 percent. Expense ratios for the fourth quarter of 2017 were slightly above this long-term operating objective due to additional charges for estimated employee incentive awards.

 

Title Insurance Segment Results - The table below reflects the major elements affecting this segment's financial performance for the periods shown.

 


Title Insurance Business Segment


Quarters Ended December 31,


Years Ended December 31,


2018


2017


Change


2018


2017


Change

Net premiums and fees earned

$

592.5


$

616.6


-3.9%


$

2,336.1


$

2,287.2


2.1%

Net investment income

10.0


9.3


6.8


38.8


37.3


4.2

Other income

(0.2)



N/M


0.3


0.5


N/M

Operating revenues

602.2


626.0


-3.8


2,375.4


2,325.0


2.2

Claim costs

3.2


(13.7)


123.9


48.3


20.8


131.7

Sales and general expenses

536.4


574.4


-6.6


2,103.0


2,060.1


2.1

Interest and other charges

1.3


1.1


15.5


4.6


6.9


-33.9

Operating expenses

541.1


561.8


-3.7


2,156.0


2,087.9


3.3

Segment pretax operating income (loss)

$

61.1


$

64.2


-4.8%


$

219.3


$

237.1


-7.5%

















Claim ratio

0.6%


(2.2)%





2.1%


0.9%




Expense ratio

90.6


93.1





90.0


90.0




Composite ratio

91.2%


90.9%





92.1%


90.9%




2018 year-over-year comparisons of revenues from title premiums and fees reflect a slowdown in housing and mortgage lending activity during the year. By contrast, claim costs trended higher as favorable development of prior years' claim reserve estimates edged down. The following table shows recent annual and interim periods' claim ratios and the effect of claim development trends:






Effect of Prior Periods'










(Favorable)/


Claim Ratio Excluding


Reported


Unfavorable Claim


Prior Periods' Claim


Claim Ratio


Reserves Development


Reserves Development

2014


5.2%




(0.8)%




6.0%


2015


4.9




(0.6)




5.5


2016


3.8




(1.1)




4.9


2017


0.9




(3.3)




4.2


2018


2.1%




(2.0)%




4.1%


4th Quarter 2017


(2.2)%




(6.4)%




4.2%


4th Quarter 2018


0.6%




(3.5)%




4.1%


Net investment income is reflective of both a relatively stable invested asset base and investment yield environment. Except for the effect of the aforementioned additional employee incentive awards in the final quarter of 2017, the operating expense ratio has remained aligned with revenues from premiums and fees.

 

RFIG Run-off Segment Results - The table below reflects the major elements affecting this segment's financial performance for the periods shown.

 


RFIG Run-off Business Segment


Quarters Ended December 31,


Years Ended December 31,


2018


2017


Change


2018


2017


Change

A. Mortgage Insurance (MI)







Net premiums earned

$

16.3


$

23.7


-31.2%


$

74.4


$

109.8


-32.3%

Net investment income

4.5


5.0


-10.7


19.2


20.4


-5.9

Claim costs (a)

8.8


12.0


-27.0


32.1


63.3


-49.2

MI pretax operating income (loss)

$

8.7


$

13.1


-33.6%


$

46.7


$

48.9


-4.5%













Claim ratio (a)

53.9%


50.8%




43.2%


57.6%



Expense ratio

20.3


15.0




20.0


16.5



Composite ratio

74.2%


65.8%




63.2%


74.1%















B. Consumer Credit Indemnity (CCI)







Net premiums earned

$

0.3


$

0.4


-27.8%


$

1.5


$

13.0


-88.3%

Net investment income

0.2


0.2



0.8


1.2


-29.6

Claim costs (a)

(2.7)


(1.4)


-95.9


(2.2)


134.5


-101.7

CCI pretax operating income (loss) (b)

$

3.0


$

1.6


86.6%


$

3.2


$

(122.4)


102.6%













Claim ratio (a)

N/M


N/M




N/M


N/M



Expense ratio

N/M


N/M




N/M


N/M



Composite ratio

N/M


N/M




N/M


N/M















C. Total MI and CCI run-off business:












Net premiums earned

$

16.6


$

24.2


-31.1%


$

75.9


$

122.9


-38.2%

Net investment income

4.7


5.3


-10.7


20.1


21.7


-7.2

Claim costs (a)

6.0


10.6


-43.2


29.9


197.8


-84.9

Segment pretax operating income












 (loss) (b)

$

11.8


$

14.8


-20.1%


$

49.9


$

(73.5)


167.9%













Claim ratio (a)

36.3%


44.0%




39.4%


160.9%



Expense ratio

21.1


16.6




21.5


16.6



Composite ratio

57.4%


60.6%




60.9%


177.5%



____________

(a) 

RFIG run-off pretax results for the year ended December 31, 2017 include additional claim and related expense provisions of $130.0 applicable to the final settlements and probable dispositions of all known litigated and other claim costs incurred by the Company's run-off Financial Indemnity business during the Great Recession years and their aftermath. Of the total charge, $23.0 related to mortgage guaranty claim costs, and $107.0 was attributable to additional claim provisions in the consumer credit indemnity run-off business.

(b) 

In connection with the run-off mortgage guaranty ("MI") and consumer credit indemnity ("CCI") combination, $3.0 and $3.8 of pretax operating income for the fourth quarter and year 2018, and $1.8 and $(121.1) of pretax operating income (loss) for the fourth quarter and year 2017, respectively, were retained by certain general insurance companies pursuant to various quota share and stop loss reinsurance agreements. All of these amounts, however, have been reclassified such that 100% of the CCI run-off business is reported in the RFIG run-off segment.

Pretax operating results of the run-off MI and CCI business reflect the expected, continuing drop in net earned premiums from declining risk in force. For the CCI coverage in particular, the much lower premiums in 2018 resulted mostly from the 2017 elimination of a major bank business relationship which had been a significant source of both earned premiums and substantially higher litigated claim costs.

The ratios of MI incurred claim costs to earned premiums were reduced by 31.3 and 27.0 percentage points in this year's fourth quarter and for all of 2018, respectively. For the same respective periods of 2017, the reductions amounted to 32.6 and 38.3 percentage points. In each instance, the reductions reflect favorable developments of prior years' claim reserves. MI claim costs for 2017, however, had risen most significantly due to third quarter additional claim provisions of $23.0 which added 20.9 percentage points to the claim ratio for the year.

The much more favorable CCI claim ratios for this years' fourth quarter and all of 2018 reflect the absence of the aforementioned litigation-induced claim costs and favorable development of previously established claim reserves. During 2017's third quarter, additional claim provisions in the amount of $107.0 were made to cover the final settlements and probable dispositions of all known litigated and other claim costs incurred during the Great Recession and its aftermath.

Corporate and Other Operating Results - The combination of a small life and accident insurance business and the net costs associated with the parent holding company and its internal corporate services subsidiaries usually produce highly variable results. Earnings variations stem from volatility inherent to the small scale of the life and accident insurance line, net investment income, and net interest charges (credits) pertaining to external and intra-system financing arrangements. Fourth quarter and full year results were enhanced by the elimination of interest costs related to outstanding external debt converted into ORI common stock in March 2018. Additionally, year-over-year comparisons were particularly affected by a charge of $9.5 resulting from a fourth quarter 2017 review and update of previously established estimates of future interest rates, mortality, and persistency in largely inactive life insurance products. The interplay of these various elements is summarized in the following table:


Corporate and Other Operations


Quarters Ended


Years Ended


December 31,


December 31,


2018


2017


2018


2017

Net life and accident premiums earned

$

3.4


$

4.3


$

14.6


$

18.8

Net investment income

8.3


8.1


31.7


31.4

Other operating income



(0.1)


(0.1)

Operating revenues

11.7


12.4


46.3


50.1

Claim costs

4.0


12.3


16.7


25.8

Insurance expenses

1.0


1.3


4.8


8.2

Corporate, interest and other expenses - net

(6.2)


1.4


(15.6)


6.1

Operating expenses

(1.1)


15.0


5.9


40.2

Corporate and other pretax operating income (loss)

$

12.8


$

(2.5)


$

40.4


$

9.9

 

Summary Consolidated Balance Sheet - The following table shows Old Republic's consolidated financial position at the dates shown.



December 31,



2018


2017

Assets:





Cash and fixed maturity securities


$

9,683.0


$

10,145.9

Equity securities


3,380.9


3,265.5

Other invested assets


123.4


124.9

Cash and invested assets


13,187.4


13,536.4

Accounts and premiums receivable


1,499.4


1,469.7

Federal income tax recoverable: Current


16.8


Prepaid federal income taxes


129.8


114.3

Reinsurance balances recoverable


3,484.5


3,371.8

Sundry assets


1,008.9


911.1

Total


$

19,327.1


$

19,403.5

Liabilities and Shareholders' Equity:





Policy liabilities


$

2,303.5


$

2,176.3

Claim reserves


9,471.2


9,237.6

Federal income tax payable: Current



6.5

                                              Deferred


10.3


100.5

Debt


981.4


1,448.7

Sundry liabilities


1,414.2


1,700.5

Shareholders' equity


5,146.2

(a)

4,733.3

Total


$

19,327.1


$

19,403.5

______________

(a) Reflects the completed conversion of the 3.75% convertible senior notes into ORI common stock in March, 2018.

 

Cash, Invested Assets, and Shareholders' Equity - The table below shows Old Republic's consolidated cash and invested assets as well as shareholders' equity at the dates shown.



Cash, Invested Assets, and Shareholders' Equity









% Change



December 31,


Dec. '18/


Dec. '17/



2018


2017


2016


Dec. '17


Dec. '16

Cash and invested assets:











Available for sale fixed maturity securities, cash











   and other invested assets, carried at fair value

$

8,761.7



$

9,203.4



$

9,124.9



-4.8

%


0.9

%


Equity securities, carried at fair value

3,380.9



3,265.5



2,896.1



3.5

%


12.8

%


Held to maturity, carried at amortized cost

1,044.8



1,067.4



974.8



-2.1

%


9.5

%


Total per balance sheet

$

13,187.4



$

13,536.4



$

12,995.8



-2.6

%


4.2

%


Total at original cost for all

$

12,950.6



$

12,783.4



$

12,360.3



1.3

%


3.4

%













Shareholders' equity: Total

$

5,146.2



$

4,733.3



$

4,460.6



8.7

%


6.1

%



    Per common share

$

17.23



$

17.72



$

17.16



-2.8

%


3.3

%












Composition of shareholders' equity per share:











Equity before items below

$

17.04



$

16.26



$

15.92



4.8

%


2.1

%


Unrealized investment gains (losses) and other












accumulated comprehensive income (loss)

0.19



1.46



1.24









Total

$

17.23



$

17.72



$

17.16



-2.8

%


3.3

%














Segmented composition of










 shareholders' equity per share:











Excluding run-off segment

$

15.73



$

16.14



$

15.89



-2.5

%


1.6

%


RFIG run-off segment

1.50



1.58



1.27









Consolidated total

$

17.23



$

17.72



$

17.16



-2.8

%


3.3

%

Old Republic's invested assets portfolio is directed in consideration of enterprise-wide risk management objectives. Most importantly, these are intended to ensure solid funding of the insurance subsidiaries' long-term obligations to policyholders and other beneficiaries, as well as the long-term stability of the subsidiaries' capital accounts. To this end, the investment portfolio contains no significant insurance risk-correlated asset exposures to real estate, mortgage-backed securities, collateralized debt obligations ("CDO's"), derivatives, hybrid securities, or illiquid private equity and hedge fund investments. Moreover, the Company does not engage in hedging or securities lending transactions, nor does it invest in securities whose values are predicated on non-regulated financial instruments exhibiting amorphous or unfunded counter-party risk attributes.

As of December 31, 2018, the consolidated investment portfolio reflected an allocation of approximately 74% to fixed-maturity and short-term investments, and 26% to high quality, dividend-paying equity securities. The asset quality of the fixed maturity portfolio has remained at high levels.

Changes in shareholders' equity per share are reflected in the following table. As shown, these resulted mostly from net income, dividend payments to shareholders, and changes in the value of invested assets carried at fair value.


Shareholders' Equity Per Share


December 31,


2018


2017


2016

Beginning balance

$

17.72



$

17.16



$

14.98


Changes in shareholders' equity:






Net income (loss) excluding net investment gains (losses)

1.89



1.21



1.62


Net of tax realized investment gains (losses):






From actual transactions

0.16



0.53



0.19


From impairments





(0.01)


From revaluation of deferred taxes



0.40




  Subtotal

0.16



0.93



0.18


Net of tax unrealized investment gains (losses) on






 securities carried at fair value:






Reported in net income (loss)

(0.79)






Reported as other comprehensive income (loss)

(0.59)



0.28



1.12


  Subtotal

(1.38)



0.28



1.12


  Total net of tax realized and unrealized






 investment gains (losses)

(1.22)