CHICAGO, April 25,
2024 /PRNewswire/ --
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OVERALL RESULTS
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Quarters Ended March
31,
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2024
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2023
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% Change
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Pretax
income
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$
398.7
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$
249.2
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Pretax investment
gains
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167.1
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26.2
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Pretax income excluding
investment gains
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$
231.5
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$
222.9
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3.9 %
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Net income
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$
316.7
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$
199.8
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Net of tax investment
gains
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132.0
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20.6
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Net income excluding
investment gains
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$
184.7
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$
179.2
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3.1 %
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Combined
ratio
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94.3 %
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92.7 %
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PER DILUTED SHARE
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Quarters Ended March
31,
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2024
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2023
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% Change
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Net income
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$ 1.15
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$ 0.68
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Net of tax investment
gains
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0.48
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0.07
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Net income excluding
investment gains
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$ 0.67
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$ 0.61
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9.8 %
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SHAREHOLDERS' EQUITY (BOOK
VALUE)
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Mar. 31,
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Dec. 31,
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2024
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2023
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% Change
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Total
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$ 6,400.9
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$ 6,410.7
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(0.2) %
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Per Common
Share
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$
23.83
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$
23.31
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2.2 %
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________
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All amounts in this
report are stated in millions except where noted, common stock
data, and percentages.
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Old Republic International Corporation (NYSE: ORI) today
reported pretax income, excluding investment gains (pretax
operating income), of $231.5, an
increase of 3.9% compared to the first quarter of last year,
reflecting strong growth in General Insurance pretax operating
income, partially offset by a decline in Title Insurance.
Summary of results for the quarter:
- Diluted net operating income per share of $0.67, up 9.8% over last year.
- Consolidated combined ratio of 94.3%, up 1.6 points over last
year.
- Consolidated net premiums and fees earned of over $1.6 billion, up 5.6%, resulting from double
digit growth in General Insurance partially offset by a decline in
Title Insurance.
- Net investment income of $164.1,
up 19.1%, driven by higher investment yields.
- Favorable loss reserve development of 2.3 points, compared to
4.5 points last year.
- Total capital returned to shareholders during the quarter of
$264, comprised of $72 in dividends, and $193 in share repurchases. Following the close of
the quarter, an additional $146 was
returned via share repurchases.
- Book value per share of $23.83,
up 3.4%, inclusive of dividends.
Old Republic's business is managed for the long run. In this
context management's key objectives are to achieve highly
profitable operating results over the long term, and to ensure
balance sheet strength for the insurance underwriting subsidiaries'
obligations. Therefore, the evaluation of periodic and long-term
results excludes consideration of all investment gains (losses).
Under Generally Accepted Accounting Principles (GAAP), however, net
income, inclusive of investment gains (losses), is the measure of
total profitability.
In management's opinion, the focus on income excluding
investment gains (losses), also described herein as segment pretax
operating income, provides a better way to analyze, evaluate, and
establish accountability for the results of the insurance
operations. The inclusion of realized investment gains (losses) in
net income can mask trends in operating results, because such
realizations are often highly discretionary. Similarly, the
inclusion of unrealized investment gains (losses) in equity
securities can further distort such operating results with
significant period-to-period fluctuations.
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FINANCIAL
HIGHLIGHTS
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Quarters Ended March
31,
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SUMMARY INCOME
STATEMENTS:
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2024
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2023
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% Change
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Revenues:
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Net premiums and fees
earned
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$
1,642.7
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$
1,555.2
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5.6 %
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Net investment
income
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164.1
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137.8
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19.1
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Other
income
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41.9
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39.4
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6.2
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Total operating
revenues
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1,848.8
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1,732.4
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6.7
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Investment gains
(losses):
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Realized from actual
transactions and impairments
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180.4
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28.2
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Unrealized from
changes in fair value of equity securities
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(13.3)
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(2.0)
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Total investment
gains
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167.1
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26.2
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Total
revenues
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2,015.9
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1,758.7
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Operating
expenses:
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Loss and loss
adjustment expenses
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697.4
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603.9
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15.5
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Sales and general
expenses
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903.3
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888.6
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1.7
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Interest and other
expenses
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16.4
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16.9
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(2.8)
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Total operating
expenses
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1,617.2
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1,509.5
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7.1 %
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Pretax
income
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398.7
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249.2
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Income
taxes
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81.9
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49.3
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Net
income
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$ 316.7
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$ 199.8
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COMMON STOCK
STATISTICS:
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Components of net
income per share:
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Basic net income
excluding investment gains
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$
0.68
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$
0.61
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11.5 %
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Net investment gains
(losses):
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Realized investment
gains
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0.53
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0.08
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Unrealized from
changes in fair value of equity securities
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(0.04)
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(0.01)
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Basic net
income
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$
1.17
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$
0.68
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Diluted net income
excluding investment gains
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$
0.67
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$
0.61
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9.8 %
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Net investment gains
(losses):
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Realized investment
gains
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0.52
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0.08
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Unrealized from
changes in fair value of equity securities
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(0.04)
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(0.01)
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Diluted net
income
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$
1.15
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$
0.68
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Cash dividends on
common stock
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$ 0.265
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$ 0.245
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The information presented in the following table highlights the
most meaningful indicators of ORI's segmented and consolidated
financial performance. The information underscores the performance
of the Company's insurance underwriting subsidiaries, as well as
the sound investment of their capital and underwriting cash
flows.
The results of the Republic Financial Indemnity Group (RFIG)
Run-off business, previously a reportable segment, are deemed
immaterial, and therefore are now included within Corporate &
Other. Prior period amounts have been reclassified to reflect this
change in reportable segments.
Sources of
Consolidated Income
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Quarters Ended March
31,
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2024
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2023
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% Change
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Net premiums and
fees earned:
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General
Insurance
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$ 1,091.6
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$
965.1
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13.1 %
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Title
Insurance
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545.4
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583.2
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(6.5)
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Corporate &
Other
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5.5
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6.8
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(18.3)
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Consolidated
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$ 1,642.7
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$ 1,555.2
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5.6 %
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Underwriting and
related services income (loss):
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General
Insurance
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$
105.8
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$
103.8
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1.9 %
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Title
Insurance
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(13.5)
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3.7
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N/M
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Corporate &
Other
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(8.4)
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(5.4)
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(54.0)
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Consolidated
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$ 83.8
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$
102.1
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(17.9) %
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Consolidated
combined ratio:
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Loss ratio:
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Current
year
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44.8 %
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43.3 %
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Prior years
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(2.3)
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(4.5)
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Total
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42.5
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38.8
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Expense
ratio
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51.8
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53.9
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Combined
ratio
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94.3 %
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92.7 %
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Net investment
income:
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General
Insurance
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$
131.1
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$
108.7
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20.6 %
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Title
Insurance
|
15.7
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13.7
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14.3
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Corporate &
Other
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17.3
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15.2
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13.5
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Consolidated
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$
164.1
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$
137.8
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19.1 %
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Interest and other
expenses (income):
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General
Insurance
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$ 16.5
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$ 19.4
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Title
Insurance
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(0.1)
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—
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Corporate & Other
(a)
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0.1
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(2.5)
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Consolidated
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$ 16.4
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$ 16.9
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(2.8) %
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Pretax income
excluding investment gains:
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General
Insurance
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$
220.4
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$
193.2
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14.1 %
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Title
Insurance
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2.3
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17.4
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(86.4)
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Corporate &
Other
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8.8
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12.3
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(28.6)
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Consolidated
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231.5
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222.9
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3.9 %
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Income
taxes
|
46.8
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|
43.7
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Net income excluding
investment
|
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gains
|
184.7
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|
179.2
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3.1 %
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Consolidated pretax
investment gains (losses):
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Realized from actual
transactions
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and
impairments
|
180.4
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28.2
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Unrealized from
changes in
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fair value of equity
securities
|
(13.3)
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(2.0)
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Total
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167.1
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|
26.2
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Income
taxes
|
35.1
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|
5.5
|
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Net of tax investment
gains
|
132.0
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|
20.6
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|
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Net
income
|
$
316.7
|
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$
199.8
|
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(a)
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Includes
consolidation/elimination entries.
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General Insurance Segment Operating
Results
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Quarters Ended March
31,
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2024
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2023
|
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% Change
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Net premiums
written
|
$ 1,157.1
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|
$ 1,014.0
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14.1 %
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Net premiums
earned
|
1,091.6
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|
965.1
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|
13.1
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Net investment
income
|
131.1
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|
108.7
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|
20.6
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Other income
|
41.7
|
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39.2
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6.3
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Operating
revenues
|
1,264.5
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|
1,113.1
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|
13.6
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Loss and loss
adjustment expenses
|
684.2
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|
592.3
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|
15.5
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Sales and general
expenses
|
343.3
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|
308.1
|
|
11.4
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Interest and other
expenses
|
16.5
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|
19.4
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(15.0)
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Operating
expenses
|
1,044.1
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|
919.9
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|
13.5
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Segment pretax
operating income
|
$
220.4
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|
$
193.2
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14.1 %
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Loss ratio:
|
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Current
year
|
65.2 %
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66.9 %
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Prior years
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(2.5)
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(5.5)
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Total
|
62.7
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|
61.4
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Expense
ratio
|
27.6
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|
27.9
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Combined
ratio
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90.3 %
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89.3 %
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General Insurance net premiums earned of nearly $1.1 billion increased 13.1% for the quarter,
driven by a combination of premium rate increases, high renewal
retention ratios, and new business production, including
contributions from recently established insurance underwriting
subsidiaries. Premium growth occurred across most lines of
coverage, but was most pronounced within commercial auto, property,
and general liability. There were small declines in public D&O
(included within financial indemnity) and home warranty, largely
reflecting market conditions. While commercial auto, general
liability, and property continue to achieve strong rate increases,
rate declines continued in public D&O and workers'
compensation.
The net investment income increase was largely due to higher
investment yields earned.
The reported loss ratio for General Insurance reflects lower
levels of favorable prior year reserve development and an
improvement in the current year loss ratio. Favorable development
of 2.5% came predominantly from workers' compensation and
commercial auto, partially offset by unfavorable development within
general liability. The improvement in the current year loss ratio
was most pronounced within commercial auto and workers'
compensation coverages. The reported expense ratio benefited from
scale, partially offset by investments in new businesses and
information technology. In recent years, the diversification of the
General Insurance business has resulted in shifts in the lines of
coverage mix toward lines with lower current period loss ratios and
higher expense ratios.
Together, these factors produced highly profitable combined
ratios and strong pretax operating income for the quarter. For
General Insurance, we target combined ratios between 90% and 95%
over a full underwriting cycle, recognizing that quarterly and
annual ratios and trends may deviate from this range, particularly
given the long claim payment patterns associated with the
business.
Title Insurance Segment Operating
Results
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Quarters Ended March
31,
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2024
|
|
2023
|
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% Change
|
Net premiums and fees
earned
|
$
545.4
|
|
$
583.2
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(6.5) %
|
Net investment
income
|
15.7
|
|
13.7
|
|
14.3
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Other income
|
0.1
|
|
0.1
|
|
7.9
|
Operating
revenues
|
561.3
|
|
597.1
|
|
(6.0)
|
Loss and loss
adjustment expenses
|
12.1
|
|
15.3
|
|
(21.2)
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Sales and general
expenses
|
546.9
|
|
564.2
|
|
(3.1)
|
Interest and other
expenses (income)
|
(0.1)
|
|
—
|
|
N/M
|
Operating
expenses
|
558.9
|
|
579.7
|
|
(3.6)
|
Segment pretax
operating income
|
$
2.3
|
|
$ 17.4
|
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(86.4) %
|
|
|
|
|
|
|
Loss ratio:
|
|
|
|
|
|
Current
year
|
3.4 %
|
|
3.7 %
|
|
|
Prior years
|
(1.2)
|
|
(1.1)
|
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|
Total
|
2.2
|
|
2.6
|
|
|
Expense
ratio
|
100.3
|
|
96.7
|
|
|
Combined
ratio
|
102.5 %
|
|
99.3 %
|
|
|
Title Insurance net premiums and fees earned decreased by 6.5%
for the quarter. Agency produced revenues, which are reported on a
lag relative to directly produced revenues, declined due to a
continued drop in mortgage originations attributable to higher
mortgage interest rates. Conversely, directly produced revenues
increased slightly in the current quarter. Commercial premiums
represent approximately 21% of net premiums earned compared to 25%
in the prior year quarter. Net investment income increased,
reflecting higher investment yields earned, partially offset by a
lower invested asset base.
The Title Insurance loss ratio decreased slightly reflecting
consistent levels of favorable prior year reserve development and a
decline in the current year loss ratio driven primarily by changes
in the business mix with higher levels of fees earned.
The 2023 expense ratio was impacted by the recovery of a
$17.2 state sales tax assessment,
which reduced the first quarter 2023 expense ratio by 3.0 points.
Excluding the impact of the state sales tax assessment, the expense
ratio for the quarter increased slightly and remains elevated due
to the impact of fixed costs decreasing at a slower pace than the
drop in revenues.
Together, these factors produced lower pretax operating income
for the quarter.
Corporate & Other Operating
Results
|
|
|
Quarters Ended March
31,
|
|
|
2024
|
|
2023
|
|
% Change
|
Net premiums
earned
|
|
$
5.5
|
|
$
6.8
|
|
(18.3) %
|
Net investment
income
|
|
17.3
|
|
15.2
|
|
13.5
|
Operating
revenues
|
|
22.9
|
|
22.1
|
|
3.4
|
Benefits, loss and loss
adjustment expenses
|
|
0.9
|
|
(3.8)
|
|
125.9
|
Insurance
expenses
|
|
3.2
|
|
4.7
|
|
(31.4)
|
Corporate, interest,
and other expenses - net
|
|
9.8
|
|
8.8
|
|
10.7
|
Operating
expenses
|
|
14.0
|
|
9.8
|
|
43.7
|
Corporate & Other
pretax operating income
|
|
$
8.8
|
|
$
12.3
|
|
(28.6) %
|
Corporate & Other includes a small life and accident
insurance business, the RFIG Run-off business, the parent holding
company, and several internal corporate services subsidiaries.
Corporate & Other tends to produce highly variable results
stemming from volatility inherent in the lack of scale. Net
investment income reflects a higher investment yield earned,
partially offset by a lower invested asset base attributable to the
return of capital to shareholders. On March
31, 2024, the Company issued $400 of senior notes in anticipation of the
October 2024 maturity of existing
senior notes.
Summary Consolidated Balance
Sheet
|
|
March 31,
|
|
December 31,
|
|
March 31,
|
|
2024
|
|
2023
|
|
2023
|
Assets:
|
|
|
|
|
|
Cash and fixed income
securities
|
$
13,877.4
|
|
$
13,375.4
|
|
$
12,901.1
|
Equity
securities
|
2,549.6
|
|
2,660.8
|
|
3,160.7
|
Other
|
162.3
|
|
151.3
|
|
147.4
|
Total investments,
cash, and accrued investment income
|
16,589.5
|
|
16,187.6
|
|
16,209.3
|
Accounts and notes
receivable
|
2,304.3
|
|
2,201.4
|
|
2,020.3
|
Federal income tax
assets
|
—
|
|
21.8
|
|
—
|
Reinsurance
recoverable
|
5,999.4
|
|
5,951.4
|
|
5,533.4
|
Deferred policy
acquisition costs
|
435.8
|
|
417.8
|
|
393.3
|
Other assets
|
1,735.1
|
|
1,721.2
|
|
1,241.4
|
Total
assets
|
$
27,064.3
|
|
$
26,501.4
|
|
$
25,397.9
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity:
|
|
|
|
|
|
Loss and loss
adjustment expense reserves
|
$
12,570.3
|
|
$
12,538.2
|
|
$
12,136.1
|
Other policy
liabilities
|
3,326.6
|
|
3,193.1
|
|
3,066.3
|
Federal income tax
liabilities
|
138.9
|
|
105.6
|
|
109.8
|
Reinsurance balances
and funds held
|
1,453.0
|
|
1,380.9
|
|
1,107.4
|
Debt
|
1,987.6
|
|
1,591.2
|
|
1,590.2
|
Other
liabilities
|
1,186.7
|
|
1,281.4
|
|
1,055.9
|
Total
liabilities
|
20,663.3
|
|
20,090.7
|
|
19,065.9
|
Shareholders'
equity
|
6,400.9
|
|
6,410.7
|
|
6,331.9
|
Total liabilities and
shareholders' equity
|
$
27,064.3
|
|
$
26,501.4
|
|
$
25,397.9
|
Composition of shareholders' equity per
share:
|
|
|
|
|
|
Equity before items
below
|
$
21.28
|
|
$
20.51
|
|
$
19.77
|
Unrealized investment
gains (losses) and other
|
|
|
|
|
|
accumulated
comprehensive income (loss)
|
2.55
|
|
2.80
|
|
2.14
|
Total
|
$
23.83
|
|
$
23.31
|
|
$
21.91
|
As of March 31, 2024, the consolidated investment portfolio
reflected an allocation of approximately 84% to fixed income (bonds
and notes) and short-term investments, and 16% to equity securities
(common stock). The investment management process remains focused
on retaining quality investments that produce consistent streams of
investment income. The fixed income portfolio continues to be the
anchor for the insurance underwriting subsidiaries' obligations.
The maturities of the fixed income assets are matched to the
expected liabilities for claim payment obligations to policyholders
and their beneficiaries. The equity portfolio consists of
high-quality common stocks of U.S. companies with long-term records
of reasonable earnings growth and steadily increasing
dividends.
Old Republic's investment portfolio is focused on ensuring solid
funding of the insurance underwriting subsidiaries' obligations to
policyholders and their beneficiaries, as well as the long-term
stability of the subsidiaries' capital base. For these reasons, the
investment portfolio does not contain high risk or illiquid asset
classes such as limited partnerships, derivatives, hedge funds or
private equity investments. In addition, 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 with unfunded counter-party risk attributes.
Old Republic performs regular stress tests of the investment
portfolio to gain reasonable assurance that periodic downdrafts in
market prices do not undermine the Company's financial
strength.
|
Shareholders' Equity
Per Share
|
Changes in shareholders' equity per share are reflected in the
following table. As shown, these resulted mostly from net income
excluding net investment gains, realized and unrealized investment
gains (losses), and dividend payments to shareholders.
|
Quarters Ended March
31,
|
|
2024
|
|
2023
|
Beginning
balance
|
$
23.31
|
|
$
21.07
|
Changes in
shareholders' equity:
|
|
|
|
Net income excluding
net investment gains
|
0.68
|
|
0.61
|
Net of tax realized
investment gains
|
0.53
|
|
0.08
|
Net of tax unrealized
investment gains (losses):
|
|
|
|
Fixed income
securities
|
(0.25)
|
|
0.48
|
Equity
securities
|
(0.04)
|
|
(0.01)
|
Total net of tax
realized and unrealized
|
|
|
|
investment
gains
|
0.24
|
|
0.55
|
Cash
dividends
|
(0.265)
|
|
(0.245)
|
Other - net
|
(0.14)
|
|
(0.08)
|
Net change
|
0.52
|
|
0.84
|
Ending
balance
|
$
23.83
|
|
$
21.91
|
Percentage change for
the period
|
2.2 %
|
|
4.0 %
|
Percentage change for
the period, inclusive of cash dividends
|
3.4 %
|
|
5.1 %
|
Managing Old
Republic's Insurance Business for the Long-Run
|
The insurance business is distinguished from most others in that
the prices (premiums) charged for most products are set without
knowing what the ultimate loss costs will be. We also can't know
exactly when claims will be paid, which may be many years after a
policy was issued or expired. This casts Old Republic as a
risk-taking enterprise managed for the long run. Old Republic
therefore conducts the business with a primary focus on achieving
favorable underwriting results over cycles, and on maintaining a
sound financial condition to support our insurance underwriting
subsidiaries' obligations to policyholders and their
beneficiaries.
The Company is managed for the long run and with little regard
to quarterly or even annual reporting periods. These time frames
are too short. Management believes results are best evaluated by
looking at underwriting and overall operating performance trends
over 10-year intervals. These likely include one or two economic
and/or underwriting cycles. This provides enough time for these
cycles to run their course, for premium rate changes and subsequent
underwriting results to be reflected in financial statements, and
for reserved loss costs to be quantified with greater
certainty.
Financial Supplement:
- A financial supplement to this news release is available on the
Company's website:
www.oldrepublic.com
About Old Republic
Chicago-based Old Republic
International Corporation is one of the nation's 50 largest
shareholder-owned insurance businesses. It is a member of the
Fortune 500 listing of America's largest companies. The
Company is organized as an insurance holding company whose
subsidiaries actively market, underwrite, and provide risk
management services for a wide variety of coverages mostly in the
general and title insurance fields. Old Republic's general
insurance business ranks among the nation's 50 largest, while its
title insurance business is the third largest in its industry.
Conference Call Information
Old Republic has scheduled a conference call at 3:00 p.m. ET (2:00 p.m.
CT) today to discuss its first quarter 2024 performance and
to review major operating trends and business developments. The
call can be accessed live on Old Republic's website at
www.oldrepublic.com or by dialing 1-888-510-2411, passcode 4060501.
Interested parties may also listen to a replay of the call through
May 2, 2024 by dialing
1-800-770-2030, passcode 4060501, or by accessing it on Old
Republic International's website.
Safe Harbor Statement
Historical data pertaining to the operating results, 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 oral or written statements made in the Company's
reports, press releases, and 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 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 particularly affected 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 investment yields 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. Title Insurance and
RFIG Run-off results can be affected by similar factors, and 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. Life and accident insurance
earnings can be affected by the levels of employment and consumer
spending, changes in mortality and health trends, and alterations
in policy lapsation rates. At the parent holding 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.
General Insurance, Title Insurance, and Corporate & Other
maintain customer information and rely upon technology platforms to
conduct their business. As a result, each of them and the Company
are exposed to cyber risk. Many of the Company's operating
subsidiaries maintain separate IT systems which are deemed to
reduce enterprise-wide risks of potential cybersecurity incidents.
However, given the potential magnitude of a significant breach, the
Company continually evaluates on an enterprise-wide basis its IT
hardware, security infrastructure and business practices to respond
to these risks and to detect and remediate in a timely manner
significant cybersecurity incidents or business process
interruptions. Refer to Part I, Item 1C - Cybersecurity, of the
Company's 2023 Form 10-K Annual Report filing to the Securities and
Exchange Commission for additional discussion.
A more detailed listing and discussion of the risks and other
factors which affect the Company's risk-taking insurance business
are included in Part I, Item 1A - Risk Factors, of the Company's
2023 Form 10-K.
Any forward-looking statements or commentaries speak only as of
their dates. Old Republic undertakes no obligation to publicly
update or revise any and all such comments, whether as a result of
new information, future events or otherwise, and accordingly they
may not be unduly relied upon.
For Old Republic's
latest news releases and other corporate documents:
Please visit us at
www.oldrepublic.com
|
|
|
|
|
|
|
|
Alternatively,
please write or call:
|
|
|
Investor
Relations
|
|
Old Republic
International Corporation
|
307 North Michigan
Avenue, Chicago, IL 60601
|
(312)
346-8100
|
|
|
|
At Old Republic:
|
At Financial Relations Board:
|
|
|
Craig R. Smiddy,
President and CEO
|
Analysts/Investors: Joe
Calabrese 212/827-3772
|
|
|
View original
content:https://www.prnewswire.com/news-releases/old-republic-reports-results-for-the-first-quarter-2024-302126977.html
SOURCE Old Republic International Corporation