Old Republic (ORI) to Combine Mortgage Guaranty, Consumer Credit Indemnity Units; to Explore Options for Lines/Combination
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Old Republic International Corporation (NYSE: ORI) today announced it is combining its Consumer Credit Indemnity (CCI) division with its Mortgage Guaranty (MI) segment. The two operations offer similar insurance coverages, share the same senior management leadership, and have been operating in run-off mode since 2008 and August 2011, respectively. With this action, the Old Republic Mortgage Guaranty Group (ORMGG) has been re-named the Republic Financial Indemnity Group, Inc. (RFIG). RFIG will include a credit indemnity insurer, three existing mortgage insurers, and four related services entities, all of which will be separately held.
Recessionary conditions in U.S. housing finance beginning in 2007 have erased the long-term profitability of the MI and CCI insurance lines and led to substantial losses. As a result, capital funds identified with these lines at year-end 2006 have been fully depleted. While Old Republic maintains a long-term strategic interest in these lines, it has stopped additional capital funding for them since they no longer meet its enterprise risk management disciplines and business diversification objectives. These circumstances also reinforce Old Republic's resolve to: 1) safeguard policyholders' interests in its general (property and liability), title, and life & health insurance subsidiaries by maintaining long-established protective barriers around these companies; and 2) protect economic values inuring to the Company's debt holders and shareholders.
In consideration of all these factors, Old Republic's management and board of directors have concluded that a necessary future recapitalization of the combined business can best be effected by separating these operations from the ORI holding company. Combining the MI and CCI lines, while maintaining their separateness within RFIG, provides the corporate structure to achieve this. Management and the board are evaluating alternative approaches to most effectively and economically achieve these objectives and expect to announce a plan in the near term.
Financial Supplement/Statistical Exhibit
The plan will require certain regulatory approvals, including the authorization of various inter-company general insurance agreements for the CCI line, and the transfer of a small general insurance subsidiary to RFIG. In anticipation of executing the plan, several explanatory pro forma financial schedules have been developed to portray the likely effects a separation of the MI and CCI lines would have on Old Republic's segmented and consolidated financial statements. The schedules are included in a Statistical Exhibit posted on the Company's website: www.oldrepublic.com. Here is a listing of the schedules and their content:
Schedule A
Pro Forma Summary Statement of Financial Condition of the Reconstituted Republic Financial Indemnity Group, Inc. (RFIG) as of December 31, 2011 - These summary statements reflect the early 2012 combination of the CCI division and related capital transactions.
Schedule B
Pro Forma Summary Statement of Financial Condition of Old Republic International Corporation as of December 31, 2011, reflecting a separation of RFIG (shown in Schedule A) - These statements reflect the early 2012 combination of the CCI division with the MI segment and its pro forma separation from ORI.
Schedule C
Pro Forma Summary Income Statements of the Reconstituted RFIG for the Five Years ended December 31, 2011 - These statements show the combination of historical MI and CCI results. The CCI line has been a division of the Old Republic General Insurance Group, Inc. since it was established in 1954.
Schedule C-1
Pro Forma Summary Income Statements of the Reconstituted RFIG for Each Quarter of 2011 - These statements reflect all the factors considered in Schedule C and provide appropriate comparisons for ORI's forthcoming quarterly financial reports in 2012.
Schedule D
Pro Forma Summary Income Statements of the Old Republic General Insurance Group, Inc., for the Five Years ended December 31, 2011 - These statements reflect the historical General Insurance segment results with and without the CCI division.
Schedule D-1
Pro Forma Summary Income Statements of the Old Republic General Insurance Group, Inc. for Each Quarter of 2011 - These statements reflect all the factors considered in Schedule D and provide appropriate comparisons for ORI's forthcoming quarterly financial reports in 2012.
Schedule E
Pro Forma Consolidated Summary Income Statements of Old Republic International Corporation for the Five Years ended December 31, 2011 - These statements reflect the historical Old Republic consolidated results with and without the reconstituted RFIG.
Schedule E-1
Pro Forma Consolidated Summary Income Statements of Old Republic International Corporation for Each Quarter of 2011 - These statements reflect all the factors considered in Schedule E and provide appropriate comparisons for ORI's forthcoming quarterly financial reports in 2012.
Schedule F
Sources of Dividend Paying Capacity, Dividends Received, and Dividends Paid by Old Republic International Corporation and Subsidiaries for the five years ended December 31, 2011.
Recessionary conditions in U.S. housing finance beginning in 2007 have erased the long-term profitability of the MI and CCI insurance lines and led to substantial losses. As a result, capital funds identified with these lines at year-end 2006 have been fully depleted. While Old Republic maintains a long-term strategic interest in these lines, it has stopped additional capital funding for them since they no longer meet its enterprise risk management disciplines and business diversification objectives. These circumstances also reinforce Old Republic's resolve to: 1) safeguard policyholders' interests in its general (property and liability), title, and life & health insurance subsidiaries by maintaining long-established protective barriers around these companies; and 2) protect economic values inuring to the Company's debt holders and shareholders.
In consideration of all these factors, Old Republic's management and board of directors have concluded that a necessary future recapitalization of the combined business can best be effected by separating these operations from the ORI holding company. Combining the MI and CCI lines, while maintaining their separateness within RFIG, provides the corporate structure to achieve this. Management and the board are evaluating alternative approaches to most effectively and economically achieve these objectives and expect to announce a plan in the near term.
Financial Supplement/Statistical Exhibit
The plan will require certain regulatory approvals, including the authorization of various inter-company general insurance agreements for the CCI line, and the transfer of a small general insurance subsidiary to RFIG. In anticipation of executing the plan, several explanatory pro forma financial schedules have been developed to portray the likely effects a separation of the MI and CCI lines would have on Old Republic's segmented and consolidated financial statements. The schedules are included in a Statistical Exhibit posted on the Company's website: www.oldrepublic.com. Here is a listing of the schedules and their content:
Schedule A
Pro Forma Summary Statement of Financial Condition of the Reconstituted Republic Financial Indemnity Group, Inc. (RFIG) as of December 31, 2011 - These summary statements reflect the early 2012 combination of the CCI division and related capital transactions.
Schedule B
Pro Forma Summary Statement of Financial Condition of Old Republic International Corporation as of December 31, 2011, reflecting a separation of RFIG (shown in Schedule A) - These statements reflect the early 2012 combination of the CCI division with the MI segment and its pro forma separation from ORI.
Schedule C
Pro Forma Summary Income Statements of the Reconstituted RFIG for the Five Years ended December 31, 2011 - These statements show the combination of historical MI and CCI results. The CCI line has been a division of the Old Republic General Insurance Group, Inc. since it was established in 1954.
Schedule C-1
Pro Forma Summary Income Statements of the Reconstituted RFIG for Each Quarter of 2011 - These statements reflect all the factors considered in Schedule C and provide appropriate comparisons for ORI's forthcoming quarterly financial reports in 2012.
Schedule D
Pro Forma Summary Income Statements of the Old Republic General Insurance Group, Inc., for the Five Years ended December 31, 2011 - These statements reflect the historical General Insurance segment results with and without the CCI division.
Schedule D-1
Pro Forma Summary Income Statements of the Old Republic General Insurance Group, Inc. for Each Quarter of 2011 - These statements reflect all the factors considered in Schedule D and provide appropriate comparisons for ORI's forthcoming quarterly financial reports in 2012.
Schedule E
Pro Forma Consolidated Summary Income Statements of Old Republic International Corporation for the Five Years ended December 31, 2011 - These statements reflect the historical Old Republic consolidated results with and without the reconstituted RFIG.
Schedule E-1
Pro Forma Consolidated Summary Income Statements of Old Republic International Corporation for Each Quarter of 2011 - These statements reflect all the factors considered in Schedule E and provide appropriate comparisons for ORI's forthcoming quarterly financial reports in 2012.
Schedule F
Sources of Dividend Paying Capacity, Dividends Received, and Dividends Paid by Old Republic International Corporation and Subsidiaries for the five years ended December 31, 2011.
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