Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Old Republic International Corp (ORI, Financial) reported a strong balance sheet, returning capital to shareholders through dividends and share repurchases.
- Net investment income increased by 17% in the quarter, driven by higher yields on the bond portfolio.
- General insurance net written premiums were up 16% in the quarter, with strong renewal retention rate increases and new business growth.
- The company is on track to produce its 10th consecutive year of favorable loss reserve development.
- Title insurance saw a 4% increase in premium and fee revenue compared to the third quarter of last year, with direct new title orders up 11%.
Negative Points
- Consolidated pretax operating income decreased to $229 million from $251 million in the previous year.
- The combined ratio for general insurance increased to 94 from 89 last year, reflecting lower favorable prior year loss reserve development.
- Title insurance faced headwinds due to high mortgage interest rates and a tight real estate market.
- Unfavorable development of around $25 million was recorded within financial indemnity, primarily related to transactional risks.
- The expense ratio for title insurance remained high at 94%, consistent with the previous year, indicating ongoing cost pressures.
Q & A Highlights
Q: Can you provide an update on the capital management initiatives, specifically regarding share repurchase expectations for the remainder of the year and into 2025?
A: Frank Sodaro, CFO, stated that share repurchases in the quarter amounted to $165 million, with an additional $23 million since the end of the quarter. This brings the total for the year to $768 million. There is about $385 million remaining in the current authorization. Craig Smiddy, CEO, added that the pace of repurchases depends on valuation and could continue through the end of the year or into the first quarter of next year.
Q: Could you elaborate on the growth in the ENS (Excess and Surplus) lines and the role of new ventures in this growth?
A: Craig Smiddy, CEO, explained that Old Republic Union, their non-admitted Surplus Lines company, is seeing growth primarily from new subsidiaries like Old Republic ENS and Old Republic Inland Marine. The ENS premiums were up 21% in the quarter, and this growth is expected to continue at a strong pace over the next few years.
Q: Regarding the $25 million unfavorable development in financial lines, is this a one-time situation or could it continue in future quarters?
A: Craig Smiddy, CEO, clarified that the transactional risk business is a small part of their professional liability unit. The unfavorable development was due to a small number of claims with severity, and they have taken a conservative approach by putting up reserves. The situation will be monitored, but the current reserves reflect their best view.
Q: Are you experiencing the same frequency and severity trends in commercial auto as the industry, and how does your book differ from peers?
A: Craig Smiddy, CEO, noted that while their book is different in terms of reserving and claims practices, they are not immune to industry trends in frequency and severity. They have been proactive in adjusting pricing and reserving practices, which has helped maintain favorable results compared to the industry.
Q: With the uncertainty in the real estate market, how are you approaching budgeting for new and refinancing activities in the title insurance segment?
A: Carolyn Monroe, CEO of Old Republic National Title Holding Company, mentioned that they have seen a slight increase in orders each quarter, which is a positive sign. However, predicting future trends is challenging, and they are focusing on modernization efforts and technology investments to prepare for market recovery.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
