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Form 8-K OLD REPUBLIC INTERNATION For: Jul 23

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July 24, 2015 10:51 AM EDT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549


FORM 8-K


CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934


Date of Report:  (Date of earliest event reported) July 23, 2015

OLD REPUBLIC INTERNATIONAL CORPORATION
-------------------------------------------------------
(Exact name of registrant as specified in its charter)


Delaware
  
001-10607
  
36-2678171
(State or other jurisdiction
  
(Commission
  
(I.R.S. Employer
of incorporation)
  
File Number)
  
Identification No.)


307 North Michigan Avenue, Chicago, Illinois 60601
---------------------------------------------------
(Address of principal executive offices) (Zip Code)

(312) 346-8100
----------------------------------------------------
(Registrant’s telephone number, including area code)

N/A
------------------------------------------------------------
(Former name or former address, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2 below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 140.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
1
 
 

 
Item 2.02.  Results of  Operations and Financial Condition

On July 23, 2015, Old Republic International Corporation announced the results of its operations and its financial condition for the quarter ended June 30, 2015.  The full text of the earnings release is included as Exhibit 99.1 hereto.
 
 
Item 9.01.  Financial Statements and Exhibits

(c) Exhibits
 
       99.1  Earnings Release dated July 23, 2015.      


 
2
 
 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
OLD REPUBLIC INTERNATIONAL CORPORATION
 
Registrant
   
   
   
Date: July 24, 2015
By:          /s/ Karl W. Mueller                                
   
Karl W. Mueller
   
Senior Vice President,
   
Chief Financial Officer, and
   
Chief Accounting Officer

 


 

 
3
 
 

 
INDEX TO EXHIBITS
-----------------


Exhibits

99.1  Earnings Release dated July 23, 2015.
 
 
 
 
 
 
 
 
 
4
 
 
NEWS RELEASE
 
 
Further Information Contacts:
AT OLD REPUBLIC:
AT FINANCIAL RELATIONS BOARD:
A. C. Zucaro: Chairman & CEO
Analysts/Investors: Marilynn Meek
(312) 346-8100
(212) 827-3773
 
OLD REPUBLIC REPORTS RESULTS FOR THE SECOND QUARTER AND FIRST HALF OF 2015
 
CHICAGO – July 23, 2015 – Old Republic International Corporation (NYSE: ORI) today reported that net operating income for this year's second quarter and first half exceeded our expectations. The results were bolstered by much improved underwriting performance in the Company’s general insurance business and by continued strength of its title insurance operations. The RFIG run-off segment also posted better year-over-year results partly due to less burdensome litigation claim expense provisions than experienced in the same periods of 2014. This year’s consolidated net income was comparatively lower as the unusually high level of realized investment gains recognized in the first half of 2014 were not repeated in this year's second quarter and year-to-date periods.

The major components of consolidated results and related data are summarized in the following table.

 
Financial Highlights (a)
  
   
Quarters Ended June 30,
  
Six Months Ended June 30,
  
   
2015
  
2014
  
2015
  
2014
  
 
Operating revenues:
                        
 
General insurance
$
810.1
  
$
766.8
  
$
1,613.1
  
$
1,512.1
  
 
Title insurance
  
511.1
    
429.2
    
947.8
    
831.0
  
 
Corporate and other
  
9.4
(b)
  
16.7
    
16.5
(b)
  
34.9
  
 
    Subtotal
  
1,330.6
    
1,212.8
    
2,577.5
    
2,378.2
  
 
RFIG run-off business
  
62.6
    
71.1
    
127.1
    
145.1
  
 
Total
$
1,393.3
  
$
1,283.9
  
$
2,704.6
  
$
2,523.3
  
 
Pretax operating income (loss):
                        
 
General insurance
$
85.1
  
$
59.7
  
$
167.1
  
$
141.6
  
 
Title insurance
  
47.7
    
26.0
    
63.6
    
30.8
  
 
Corporate and other
  
2.5
    
(1.7)
    
4.1
    
(2.3)
  
 
    Subtotal
  
135.3
    
83.9
    
234.9
    
170.1
  
 
RFIG run-off business
  
(0.1)
    
(34.2)
    
35.0
    
(14.6)
  
 
Total
  
135.1
    
49.7
    
270.0
    
155.4
  
 
Realized investment gains (losses):
                        
 
From sales
  
16.6
    
49.9
    
35.5
    
241.2
  
 
From impairments
  
-
    
-
    
-
    
-
  
 
    Net realized investment gains (losses)
  
16.6
    
49.9
    
35.5
    
241.2
  
 
Consolidated pretax income (loss)
  
151.8
    
99.6
    
305.6
    
396.6
  
 
Income taxes (credits)
  
49.7
    
33.5
    
100.0
    
136.0
  
 
Net income (loss)
$
102.0
  
$
66.1
  
$
205.5
  
$
260.5
  
 
Components of diluted earnings per share:
                        
 
Net operating income (loss):
                        
 
General insurance
$
0.19
  
$
0.14
  
$
0.38
  
$
0.32
  
 
Title insurance
  
0.11
    
0.06
    
0.14
    
0.07
  
 
Corporate and other
  
0.02
    
0.01
    
0.04
    
0.02
  
 
Subtotal
  
0.32
    
0.21
    
0.56
    
0.41
  
 
RFIG run-off business
  
-
    
(0.08)
    
0.08
    
(0.03)
  
 
Total
  
0.32
    
0.13
    
0.64
    
0.38
  
 
Net realized investment gains (losses)
  
0.04
    
0.11
    
0.08
    
0.53
  
 
Net income (loss)
$
0.36
  
$
0.24
  
$
0.72
  
$
0.91
  
 
Cash dividends paid per share
$
0.1850
  
$
0.1825
  
$
0.3700
  
$
0.3650
  
 
Ending book value per share
            
$
15.16
  
$
15.29
  
                           
 
(a) Unaudited; All amounts in this report are in millions except per share data and percentages.
(b) Reflects the transfer of accident insurance business from a life and accident subsidiary to a general insurance affiliate resulting in an $8.5 and $18.9 reduction in premiums during the second quarter and first half of 2015, respectively.
  
 

 
 
 
Old Republic International Corporation
 
The preceding table shows both operating and net income to highlight the effects of realized investment gain or loss recognition on period-to-period earnings comparisons. Management uses net operating income, a non-GAAP financial measure, to evaluate and better explain operating performance, believing that this measure enhances an understanding of Old Republic’s core business results. Operating income, however, does not replace net income determined in accordance with GAAP as a measure of total profitability.

The timing of realized investment gain or loss recognition can be highly discretionary due to such factors as individual securities sales, recording of estimated losses from write-downs of impaired securities, tax-planning considerations, and changes in investment management judgments relative to the direction of securities markets or the future prospects of individual investees or industry sectors. Since 2013, asset management operations have in part been oriented toward an enhancement of income from interest and dividends. To a large extent, this strategy has led to sales of non-income producing or low-yielding securities. Proceeds from these sales have largely been reinvested in higher yielding common shares of American companies with distinguished long-term records of earnings and dividend growth.

General Insurance Results – The table below shows the major elements driving operating performance for the periods reported upon.

 
General Insurance Group
 
Quarters Ended June 30,
  
Six Months Ended June 30,
 
2015
  
2014
  
Change
  
2015
  
2014
  
Change
Net premiums earned
$
709.3
  
$
671.8
  
5.6%
  
$
1,412.7
  
$
1,328.3
  
6.4%
Net investment income
  
74.7
    
69.8
  
7.0    
   
148.5
    
135.8
  
9.4    
Benefits and claim costs
  
520.2
    
518.9
  
0.3    
   
1,039.1
    
996.3
  
4.3    
Pretax operating income (loss)(*)
$
85.1
  
$
59.7
  
42.5%
  
$
167.1
  
$
141.6
  
18.0%
                               
Claim ratio
  
73.3%
    
77.2%
        
73.6%
    
75.0%
    
Expense ratio
  
23.6    
   
23.0    
       
23.5    
   
23.2    
   
Composite underwriting ratio
  
96.9%
    
100.2%
        
97.1%
    
98.2%
    
                               
(*) In connection with the run-off mortgage guaranty ("MI") and consumer credit indemnity ("CCI") combination, $20.5 and $24.9 of pretax operating losses for the second quarter and first half of 2015, and $70.8 and $87.3 of pretax operating losses for the second quarter and first half of 2014, respectively, are 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.

2015 general insurance operating earnings benefitted from more positive underwriting performance. Earned premium revenues rose for most insurance coverages with production spurred by moderately strong new and renewal business throughout this year’s first two quarters.

The gain in earned premiums was accompanied by lower expense provisions for current and prior years’ claim occurrences. Loss developments in this year’s first half were slightly deficient relative to previously established reserves. Their effect was to add approximately 0.9 and 1.0 percentage points to the claim ratio of the latest quarter and year-to-date periods, respectively. By contrast, unfavorable developments in 2014 added 2.5 and 0.7 percentage points to last year's second quarter and first half claim ratios, respectively. 2015 production and general operating expenses held steady in context of revenue trends. Year-to-date the combination of these favorable factors led to the more positive composite underwriting ratios shown in the above table.

Net investment income advanced by 7.0 and 9.4 percent in this year’s second quarter and first half, respectively. In recent quarters this revenue source has trended higher due to the combination of a rising invested asset base and enhanced yields afforded by a high quality common stock portfolio.
 
2
 
 
 
Old Republic International Corporation

Title Insurance Results – Earnings in this year's second quarter and first half continued in a highly positive vein as the comparative table below shows.

 
Title Insurance Group
 
Quarters Ended June 30,
  
Six Months Ended June 30,
 
2015
  
2014
  
Change
  
2015
  
2014
  
Change
 
Net premiums and fees earned
$
502.7
  
$
421.0
  
19.4%
  
$
931.0
  
$
814.9
  
14.3%
Net investment income
  
7.9
    
7.4
  
6.8    
   
15.9
    
14.5
  
9.4    
Claim costs
  
25.1
    
25.4
  
-1.4    
   
48.9
    
49.2
  
-0.7    
Pretax operating income (loss)
$
47.7
  
$
26.0
  
83.3%
  
$
63.6
  
$
30.8
  
106.6%
                               
Claim ratio
  
5.0%
    
6.0%
        
5.3%
    
6.0%
    
Expense ratio
  
86.7    
   
89.0    
       
89.2    
   
91.4    
   
Composite underwriting ratio
  
91.7%
    
95.0%
        
94.5%
    
97.4%
    

The substantial bottom line improvements in this year’s first half were attributable to better performance of this segment’s basic underwriting and related services functions. Operating results were buoyed by declining claim and operating costs in relation to increased premiums and fees revenues. Stronger housing and commercial property transactions together with continued market share strength led to the significant percentage growth of the revenue stream. Net investment income gained on the strength of greater yields on a slightly larger bond and stock investment portfolio.

RFIG Run-off Business Results – The following table shows RFIG's comparative results for its mortgage guaranty ("MI") and consumer credit indemnity ("CCI") run-off coverages.

 
RFIG Run-off Business
 
Quarters Ended June 30,
  
Six Months Ended June 30,
 
2015
  
2014
  
Change
  
2015
  
2014
  
Change
A. MI:
                
Net premiums earned
$
50.1
  
$
57.0
  
-12.1%
  
$
102.7
  
$
115.8
  
-11.3%
Net investment income
  
6.0
    
6.0
  
-0.1    
   
12.2
    
14.2
  
-14.2    
Claim costs
  
30.5
    
20.3
  
50.1    
   
44.1
    
43.2
  
1.9    
Pretax operating income (loss)
$
20.8
  
$
37.1
  
-43.9%
  
$
60.9
  
$
74.0
  
-17.7%
                               
Claim ratio
  
60.9%
    
35.7%
        
42.9%
    
37.4%
    
Expense ratio
  
9.6    
   
9.8    
        
9.7    
   
11.0    
   
Composite underwriting ratio
  
70.5%
    
45.5%
        
52.6%
    
48.4%
    
                               
B. CCI(*):
                
Net premiums earned
$
6.2
  
$
7.8
  
-21.2%
  
$
11.6
  
$
14.7
  
-20.6%
Net investment income
  
0.2
    
0.1
  
55.6    
   
0.4
    
0.2
  
50.4    
Benefits and claim costs
  
26.8
    
78.8
  
-65.9    
   
36.8
    
102.3
  
-64.0    
Pretax operating income (loss)
$
(21.0)
  
$
(71.4)
  
70.5%
  
$
(25.8)
  
$
(88.7)
  
70.9%
                               
Claim ratio
  
N/M
    
N/M
        
N/M
    
N/M
    
Expense ratio
  
9.4%
    
7.7%
        
9.3%
    
9.1%
    
Composite underwriting ratio
  
N/M
    
N/M
        
N/M
    
N/M
    
                               
C. Total MI and CCI business run-off:
                
Net premiums earned
$
56.3
  
$
64.8
  
-13.2%
  
$
114.4
  
$
130.5
  
-12.3%
Net investment income
  
6.3
    
6.2
  
1.1    
   
12.6
    
14.5
  
-13.0    
Benefits and claim costs
  
57.4
    
99.2
  
-42.1    
   
80.9
    
145.6
  
-44.4%
Pretax operating income (loss)
$
(0.1)
  
$
(34.2)
  
99.4%
  
$
35.0
  
$
(14.6)
  
N/M
                               
Claim ratio
  
101.9%
    
152.9%
        
70.8%
    
111.6%
    
Expense ratio
  
9.6    
   
9.5    
       
9.7   
   
10.8    
   
Composite underwriting ratio
  
111.5%
    
162.4%
        
80.5%
    
122.4%
    
                               
(*) In connection with the run-off MI and CCI combination, $20.5 and $24.9 of pretax operating losses for the second quarter and first half of 2015, and $70.8 and $87.3 of pretax operating losses for the second quarter and first half of 2014, respectively, are retained by certain general insurance companies pursuant to various quota share and stop loss reinsurance agreements. All of these amounts, however, have been reclassified and are included for segment reporting purposes such that section (B) in the above table incorporates 100% of the CCI run-off business results.
N/M = Not meaningful
 
3
 
 
 
Old Republic International Corporation
 
Consistent with a run-off operating mode, the MI and CCI lines have been posting continuing declines in earned premiums for the past several years. Second quarter 2015 MI operating results were constrained by greater provisions for disputed claims in litigation, but nonetheless extended the positive outcomes achieved since 2013’s second quarter. The continued declines in reported delinquencies and the higher rates at which previously reported defaults are cured or otherwise resolved without payment, dampened normally occurring claim provisions in the latest quarter. Since year end 2012, these factors have led to favorable development of previously established claim reserves. Setting aside the aforementioned litigation expense provisions, these positive outcomes contributed to a lowering of MI claim ratios by 80.6 and 87.0 percentage points in the second quarters of 2015 and 2014, respectively. For the first half, these ratios were reduced by 80.6 and 105.8 percentage points, respectively.

The CCI run-off portion of RFIG’s operations was also negatively impacted by litigation claim expense provisions in this year’s second quarter. The additional provision was largely responsible for the much greater CCI loss posted to this year’s second quarter compared to the results of the preceding three months of 2015. This year’s second quarter loss, however, was much less extensive than that registered in the same period of 2014 when a litigated claim was settled for a greater amount than originally anticipated.

Corporate and Other Operations – The combination of a small life and accident insurance business and the net costs associated with operations of the parent holding company and its internal services subsidiaries usually produce highly variable results. Earnings variations posted by these relatively minor elements of Old Republic's business stem from volatility inherent to the small scale of life and accident insurance operations, and net interest costs pertaining to external and intra-system financing arrangements. For this year’s second quarter and first half, the much lower life & accident premium volume reflects the transfer of accident insurance premiums from a life and accident subsidiary to a general insurance group affiliate; the effect on pretax operating income (loss) was negligible. The interplay of these various operating elements is summarized in the following table:

 
Corporate and Other Operations
 
Quarters Ended June 30,
  
Six Months Ended June 30,
 
2015
  
2014
  
Change
  
2015
  
2014
  
Change
 
Life & accident premiums earned
$
5.0
  
$
14.8
  
-65.9%
  
$
9.7
  
$
31.5
  
-69.3%
Net investment income
  
4.1
    
1.9
  
117.4    
   
7.5
    
3.2
  
128.3    
Other income
  
0.1
    
-
  
N/M    
   
(0.6)
    
-
  
N/M    
Benefits and claim costs
  
5.3
    
11.5
  
-54.0    
   
9.2
    
23.9
  
-61.5    
Insurance expenses
  
1.1
    
6.4
  
-82.9    
   
3.3
    
14.1
  
-76.6    
Corporate, interest, and other expenses-net
  
0.4
    
0.5
  
-15.6    
   
(0.1)
    
(0.7)
  
84.8%
Pretax operating income (loss)
$
2.5
  
$
(1.7)
  
242.5%
  
$
4.1
  
$
(2.3)
  
N/M    

4
 
 
 
Old Republic International Corporation
 
Consolidated Results – The combination of all of the above changes and events in Old Republic's business segments contributed to the following consolidated results:

 
ORI Consolidated
 
Quarters Ended June 30,
  
Six Months Ended June 30,
 
2015
  
2014
  
Change
  
2015
  
2014
  
Change
Net premiums and fees earned
$
1,273.5
  
$
1,172.6
  
8.6%
  
$
2,467.9
  
$
2,305.3
  
7.1%
Net investment income
  
93.1
    
85.4
  
9.1    
   
184.6
    
168.2
  
9.7   
Other income
  
26.5
    
25.8
  
2.7    
   
52.0
    
49.6
  
4.8    
Operating revenues
  
1,393.3
    
1,283.9
  
8.5    
   
2,704.6
    
2,523.3
  
7.2    
Benefits and claims
  
608.1
    
655.1
  
-7.2    
   
1,178.3
    
1,215.2
  
-3.0    
Sales and general expenses
  
639.7
    
573.5
  
11.6    
   
1,235.5
    
1,141.3
  
8.2    
Interest and other costs
  
10.2
    
5.5
  
84.6    
   
20.7
    
11.2
  
84.3   
Total operating expenses
  
1,258.1
    
1,234.2
  
1.9    
   
2,434.6
    
2,367.8
  
2.8    
Pretax operating income (loss)
  
135.1
    
49.7
  
171.9    
   
270.0
    
155.4
  
73.8   
Income taxes (credits)
  
43.9
    
16.0
  
173.3    
   
87.6
    
51.6
  
69.6    
Net operating income (loss)
  
91.2
    
33.6
  
171.3    
   
182.4
    
103.7
  
75.8    
Realized investment gains (losses)
  
16.6
    
49.9
  
-66.6    
   
35.5
    
241.2
  
-85.3    
Income taxes (credits) on realized investment gains (losses)
  
5.8
    
17.4
        
12.4
    
84.4
    
Net realized investment gains (losses)
  
10.8
    
32.4
  
-66.6    
   
23.1
    
156.8
  
-85.3    
Net income (loss)
$
102.0
  
$
66.1
  
54.4%
  
$
205.5
  
$
260.5
  
-21.1%
                               
Consolidated operating cash flow
$
112.9
  
$
36.8
  
206.8%
  
$
303.7
  
$
172.3
  
76.2%

Claim ratio
  
47.8%
    
55.9%
        
47.7%
    
52.7%
    
Expense ratio
  
47.9    
   
46.2    
       
47.7    
   
46.9    
   
Composite underwriting ratio
  
95.7%
    
102.1%
        
95.4%
    
99.6%
    

Consolidated operating cash flow for this year's first half increased by 76.2% to $303.7 versus $172.3 in the first six months of 2014. Excluding the RFIG Run-off negative operating cash flows, these amounts would be up by nearly 79% to $387.7 from $216.8, respectively.

Cash, Invested Assets, and Shareholders' Equity – The table below reflects Old Republic’s consolidated cash and invested asset balances as well as the shareholders’ equity account at the dates shown.

   
Cash, Invested Assets, and Shareholders' Equity
               
% Change
   
June 30,
  
Dec. 31,
  
June 30,
  
June '15/
  
June '15/
   
2015
  
2014
  
2014
  
Dec. '14
  
June '14
Cash and invested assets:
Fair value basis(1)
  
$
11,348.8
  
$
11,291.6
  
$
11,399.5
  
0.5
%
  
-0.4
%
 
Cost basis
  
$
10,927.3
  
$
10,717.9
  
$
10,784.3
  
2.0
%
  
1.3
%
                               
Shareholders' equity:
Total
  
$
3,937.4
  
$
3,924.0
  
$
3,953.1
  
0.3
%
  
-0.4
%
 
Per common share
  
$
15.16
  
$
15.15
  
$
15.29
  
0.1
%
  
-0.9
%
                               
Composition of shareholders' equity per share:
                              
Equity before items below
  
$
14.44
  
$
14.02
  
$
13.81
  
3.0
%
  
4.6
%
Unrealized investment gains (losses) and other
                              
accumulated comprehensive income (loss)
    
0.72
    
1.13
    
1.48
            
Total
  
$
15.16
  
$
15.15
  
$
15.29
  
0.1
%
  
-0.9
%
                               
Segmented composition of
 shareholders' equity per share:
                              
Excluding run-off segment
  
$
14.22
  
$
14.35
  
$
14.60
  
-0.9
%
  
-2.6
%
RFIG run-off segment
    
0.94
    
0.80
    
0.69
            
Total
  
$
15.16
  
$
15.15
  
$
15.29
  
0.1
%
  
-0.9
%
(1) The June 30, 2015 amount includes $61.1 (fair value) fixed maturity securities classified as held to maturity which are reported and reflected herein at amortized cost of $62.4.
 
5
 
 
 
Old Republic International Corporation
 
Old Republic's invested assets are managed in consideration of enterprise-wide risk management objectives. Most importantly, these are intended to ensure solid funding of insurance subsidiaries' long-term obligations to policyholders and other beneficiaries, and the necessary long-term stability of their capital accounts. As a result, the investment portfolio contains no significant insurance risk-correlated asset exposures to real estate, mortgage-backed securities, collateralized debt obligations ("CDO's"), derivatives, junk bonds, hybrid securities, or illiquid private equity investments. In a similar vein, 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 June 30, 2015, the consolidated investment portfolio reflected a current allocation of approximately 82 percent to fixed-maturity and short-term investments, and 18 percent to equities. Exposure to high quality dividend-paying equity securities has been emphasized since 2013. 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 indicated, the changes resulted mostly from each year’s net income or loss, increased dividend payments to shareholders, and changes in the value of invested assets carried at fair value.

   
Shareholders' Equity Per Share
   
Quarter Ended
June 30,
  
Six Months Ended
June 30,
   
2015
  
2015
  
2014
Beginning balance
  
$
15.48
  
$
15.15
  
$
14.64
Changes in shareholders' equity:
                  
Net operating income (loss)
    
0.35
    
0.70
    
0.40
Net realized investment gains (losses):
                  
From sales
    
0.04
    
0.09
    
0.61
From impairments
    
-
    
-
    
-
Subtotal
    
0.04
    
0.09
    
0.61
Net unrealized investment gains (losses)
    
(0.52)
    
(0.38)
    
0.03
Total realized and unrealized investment gains (losses)
    
(0.48)
    
(0.29)
    
0.64
Cash dividends
    
(0.18)
    
(0.37)
    
(0.37)
Stock issuance, foreign exchange, and other transactions
    
(0.01)
    
(0.03)
    
(0.02)
Net change
    
(0.32)
    
0.01
    
0.65
Ending balance
  
$
15.16
  
$
15.16
  
$
15.29

Capitalization – In last year’s third quarter the Company raised $400 through a public offering of 10-year notes. Since then no substantial changes other than those noted immediately above have occurred in Old Republic’s consolidated debt and equity capitalizations.

   
Capitalization
   
June 30,
  
December 31,
  
June 30,
   
2015
  
2014
  
2014
Debt:
                  
3.75% Convertible Senior Notes due 2018
  
$
550.0
  
$
550.0
  
$
550.0
4.875% Senior Notes due 2024
    
400.0
    
400.0
    
-
ESSOP debt with an average yield of approximately 3.7%
    
11.7
    
15.0
    
15.0
Other miscellaneous debt
    
-
    
-
    
1.1
Total debt
    
961.7
    
965.0
    
566.2
Common shareholders' equity
    
3,937.4
    
3,924.0
    
3,953.1
Total capitalization
  
$
4,899.2
  
$
4,889.1
  
$
4,519.3
                   
Capitalization ratios:
                  
Debt
    
19.6%
    
19.7%
    
12.5%
Common shareholders' equity
    
80.4    
   
80.3    
   
87.5    
Total
    
100.0%
    
100.0%
    
100.0%

6
 
 
 
Old Republic International Corporation
 
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 second quarter 2015 performance and to review major operating trends and business developments. To access this call live in listen-only mode:

·  
Log on to the Company's website at www.oldrepublic.com 15 minutes before the call to download the necessary software, or, alternatively

·  
the call can also be accessed by phone at 888-576-4398.

Interested parties may also listen to a replay of the call through July 30, 2015 by dialing 877-870-5176, passcode 9722703, or by accessing it on Old Republic International's website through August 23, 2015.

About Old Republic
Chicago-based Old Republic International Corporation is one of the nation's 50 largest publicly held insurance organizations. Its most recent financial statements reflect consolidated assets of approximately $17.2 billion and common shareholders' equity of $3.9 billion, or $15.16 per share. Its current stock market valuation is approximately $4.21 billion, or $16.13 per share.

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. A long-term interest in mortgage guaranty and consumer credit indemnity lines has devolved to a run-off operating mode in recent years.

The nature of Old Republic's business requires that it be managed for the long run. For the 25 years ended in 2014, the Company's total market return, with dividends reinvested, has grown at a compounded annual rate of 11.0 percent per share. For the same period, the total market return, with dividends reinvested, for the S&P 500 Index has grown at a 9.6 percent annual compound rate. During those years, Old Republic's shareholders' equity account, inclusive of cash dividends, has risen at an average annual rate of 9.7 percent per share, and the regular cash dividend has grown at a 9.5 percent annual compound rate. According to the most recent edition of Mergent's Dividend Achievers, Old Republic is one of just 97 qualifying companies, out of thousands considered, that have posted at least 25 consecutive years of annual dividend growth.

     
     
Accompanying Financial Data:
·  
Summary Financial Statements and Common Stock Statistics
·  
Safe Harbor Statement

Financial Supplement
A financial supplement to this news release is available on the Company's website.
 
7
 
 
 
Old Republic International Corporation

Old Republic International Corporation
            
Summary Financial Statements and Common Stock Statistics (Unaudited)
            
   
June 30,
  
December 31,
  
June 30,
SUMMARY BALANCE SHEETS:
  
2015
  
2014
  
2014
Assets:
                  
Cash and fixed maturity securities                                                                                         
  
$
9,276.3
  
$
9,163.4
  
$
9,861.1
Equity securities                                                                                         
    
1,956.1
    
2,011.7
    
1,424.1
Other invested assets                                                                                         
    
116.2
    
116.4
    
114.3
Cash and invested assets                                                                                     
    
11,348.8
    
11,291.6
    
11,399.5
Accounts and premiums receivable                                                                                         
    
1,405.2
    
1,287.6
    
1,380.0
Federal income tax recoverable:
Current                                                     
    
16.6
    
29.2
    
77.7
 
Deferred                                                     
    
83.5
    
37.0
    
43.5
Prepaid federal income taxes                                                                                         
    
63.3
    
45.7
    
30.9
Reinsurance balances recoverable                                                                                         
    
3,459.3
    
3,422.5
    
3,395.2
Sundry assets                                                                                         
    
900.2
    
874.2
    
856.8
Total                                                                                     
  
$
17,277.0
  
$
16,988.1
  
$
17,183.9
Liabilities and Shareholders' Equity:
                  
Policy liabilities                                                                                         
  
$
2,001.5
  
$
1,832.7
  
$
1,889.5
Benefit and claim reserves                                                                                         
    
9,131.6
    
9,122.0
    
9,648.8
Debt                                                                                         
    
961.7
    
965.0
    
566.2
Sundry liabilities                                                                                         
    
1,244.6
    
1,144.2
    
1,126.1
Shareholders' equity                                                                                         
    
3,937.4
    
3,924.0
    
3,953.1
Total                                                                                     
  
$
17,277.0
  
$
16,988.1
  
$
17,183.9
                   
   
Quarters Ended
  
Six Months Ended
  
Fiscal Twelve Months Ended
SUMMARY INCOME STATEMENTS:
  
June 30,
  
June 30,
  
June 30,
   
2015
  
2014
  
2015
  
2014
  
2015
  
2014
Net premiums and fees earned
  
$
1,273.5
  
$
1,172.6
  
$
2,467.9
  
$
2,305.3
  
$
4,973.7
  
$
4,803.1
Net investment income
    
93.1
    
85.4
    
184.6
    
168.2
    
361.9
    
328.8
Other income                                           
    
26.5
    
25.8
    
52.0
    
49.6
    
103.9
    
96.1
Net realized investment gains (losses)
    
16.6
    
49.9
    
35.5
    
241.2
    
66.7
    
247.6
Total revenues                                        
    
1,410.0
    
1,333.9
    
2,740.2
    
2,764.5
    
5,506.3
    
5,475.7
Benefits and claims                                           
    
608.1
    
655.1
    
1,178.3
    
1,215.2
    
2,477.5
    
2,344.5
Sales and general expenses
    
639.7
    
573.5
    
1,235.5
    
1,141.3
    
2,475.1
    
2,420.9
Interest and other costs
    
10.2
    
5.5
    
20.7
    
11.2
    
35.1
    
21.4
Total expenses                                        
    
1,258.1
    
1,234.2
    
2,434.6
    
2,367.8
    
4,987.9
    
4,787.0
Pretax income (loss)
    
151.8
    
99.6
    
305.6
    
396.6
    
518.4
    
688.7
Income taxes (credits) 
    
49.7
    
33.5
    
100.0
    
136.0
    
163.6
    
230.5
Net income (loss) 
  
$
102.0
  
$
66.1
  
$
205.5
  
$
260.5
  
$
354.7
  
$
458.2
                                     
                                     
COMMON STOCK STATISTICS:
                                    
Net income (loss):
Basic                      
  
$
.39
  
$
.26
  
$
.79
  
$
1.01
  
$
1.37
  
$
1.78
 
Diluted                      
  
$
.36
  
$
.24
  
$
.72
  
$
.91
  
$
1.25
  
$
1.60
Components of earnings per share:
                                    
Basic, net operating income (loss)
  
$
.35
  
$
.13
  
$
.70
  
$
.40
  
$
1.20
  
$
1.16
Realized investment gains (losses)
    
.04
    
.13
    
.09
    
.61
    
.17
    
.62
Basic net income (loss)
  
$
.39
  
$
.26
  
$
.79
  
$
1.01
  
$
1.37
  
$
1.78
Diluted, net operating income (loss)
  
$
.32
  
$
.13
  
$
.64
  
$
.38
  
$
1.10
  
$
1.06
Realized investment gains (losses)
    
.04
    
.11
    
.08
    
.53
    
.15
    
.54
Diluted net income (loss)
  
$
.36
  
$
.24
  
$
.72
  
$
.91
  
$
1.25
  
$
1.60
Cash dividends on common stock
  
$
.1850
  
$
.1825
  
$
.3700
  
$
.3650
  
$
.7350
  
$
.7250
Book value per share
                          
$
15.16
  
$
15.29
Common shares outstanding:
                                    
Average basic                                        
    
259,468,711
    
258,379,076
    
259,371,887
    
258,282,459
    
259,198,845
  
258,112,691
Average diluted                                        
    
295,987,501
    
295,051,774
    
295,852,949
    
294,902,279
    
295,629,170
  
294,698,591
Actual, end of period
                            
259,678,854
  
258,597,605
                                     
                                     
SUMMARY STATEMENTS OF COMPREHENSIVE INCOME (LOSS):
                        
Net income (loss) as reported
  
$
102.0
  
$
66.1
  
$
205.5
  
$
260.5
  
$
354.7
  
$
458.2
Post-tax net unrealized gains (losses)
    
(134.6)
    
61.8
    
(98.7)
    
6.7
    
(126.0)
    
11.8
Other adjustments                                           
    
1.7
    
1.9
    
(5.6)
    
(1.6)
    
(69.3)
    
64.9
Net adjustments                                        
    
(132.9)
    
63.7
    
(104.4)
    
5.0
    
(195.4)
    
76.7
Comprehensive income (loss)
  
$
(30.8)
  
$
129.9
  
$
101.1
  
$
265.6
  
$
159.3
  
$
534.9
                                     

8
 
 
 
Old Republic International Corporation
 
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. Of necessity, 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 affected, in particular, by the level of market competition, which is typically a function of available capital and expected returns on such capital among competitors, the levels of interest and inflation rates, and periodic changes in claim frequency and severity patterns caused by natural disasters, weather conditions, accidents, illnesses, work-related injuries, and unanticipated external events. 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, variations in mortality and health trends, and changes 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.

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 2014 Form 10-K Annual Report and Part II, Item 1A - Risk Factors, of the Company's recent Form 10-Q filings to the Securities and Exchange Commission, which Items are specifically incorporated herein by reference.

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 the latest news releases and other corporate documents on Old Republic:
Please write to:
Investor Relations
Old Republic International Corporation
307 North Michigan Avenue
Chicago, IL  60601
312-346-8100
or visit us at www.oldrepublic.com
 
 
-30-

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