CHICAGO, Jan. 26, 2017 /PRNewswire/ -- Old Republic
International Corporation (NYSE: ORI) today reported much higher
operating income for the final quarter and all of 2016.
Year-over-year pretax operating income comparisons were marked by
relatively stable general insurance performance, by record-setting
title insurance earnings, and by better underwriting results in the
RFIG run-off segment. 2016 consolidated net income, however, grew
at a slower pace as realized investment gains were lower than prior
year levels. The segmented components of consolidated results and
related data are summarized in the following table.
|
Financial
Highlights (a)
|
|
|
|
Quarters
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
Operating
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
insurance
|
$
|
847.6
|
|
$
|
844.7
|
|
$
|
3,354.7
|
|
$
|
3,313.3
|
|
|
Title
insurance
|
|
628.9
|
|
|
556.9
|
|
|
2,244.1
|
|
|
2,080.7
|
|
|
Corporate and
other
|
|
12.7
|
|
|
8.6
|
|
|
35.4
|
|
|
35.8
|
|
|
Subtotal
|
|
1,489.3
|
|
|
1,410.2
|
|
|
5,634.3
|
|
|
5,429.8
|
|
|
RFIG run-off
business
|
|
44.6
|
|
|
55.6
|
|
|
193.2
|
|
|
245.0
|
|
|
Total
|
$
|
1,533.9
|
|
$
|
1,465.9
|
|
$
|
5,827.6
|
|
$
|
5,674.8
|
|
|
Pretax operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
insurance
|
$
|
76.8
|
|
$
|
72.2
|
|
$
|
319.9
|
|
$
|
336.4
|
|
|
Title
insurance
|
|
85.6
|
|
|
48.1
|
|
|
210.2
|
|
|
166.8
|
|
|
Corporate and
other
|
|
4.1
|
|
|
(0.2)
|
|
|
13.0
|
|
|
7.6
|
|
|
Subtotal
|
|
166.7
|
|
|
120.1
|
|
|
543.3
|
|
|
511.0
|
|
|
RFIG run-off
business
|
|
9.3
|
|
|
6.9
|
|
|
69.8
|
|
|
29.4
|
|
|
Total
|
|
176.0
|
|
|
127.1
|
|
|
613.1
|
|
|
540.4
|
|
|
Realized
investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From sales
|
|
14.7
|
|
|
14.2
|
|
|
77.8
|
|
|
91.3
|
|
|
From
impairments
|
|
-
|
|
|
-
|
|
|
(4.9)
|
|
|
-
|
|
|
Net realized
investment gains (losses)
|
|
14.7
|
|
|
14.2
|
|
|
72.8
|
|
|
91.3
|
|
|
Consolidated
pretax income (loss)
|
|
190.7
|
|
|
141.4
|
|
|
686.0
|
|
|
631.8
|
|
|
Income taxes
(credits)
|
|
58.7
|
|
|
50.7
|
|
|
219.0
|
|
|
209.6
|
|
|
Net income
(loss)
|
$
|
131.9
|
|
$
|
90.6
|
|
$
|
466.9
|
|
$
|
422.1
|
|
|
Components of
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
insurance
|
$
|
0.19
|
|
$
|
0.15
|
|
$
|
0.76
|
|
$
|
0.76
|
|
|
Title
insurance
|
|
0.19
|
|
|
0.11
|
|
|
0.46
|
|
|
0.37
|
|
|
Corporate and
other
|
|
0.03
|
|
|
0.01
|
|
|
0.09
|
|
|
0.08
|
|
|
Subtotal
|
|
0.41
|
|
|
0.27
|
|
|
1.31
|
|
|
1.21
|
|
|
RFIG run-off
business
|
|
0.02
|
|
|
0.02
|
|
|
0.15
|
|
|
0.07
|
|
|
Total
|
|
0.43
|
|
|
0.29
|
|
|
1.46
|
|
|
1.28
|
|
|
Net realized
investment gains (losses)
|
|
0.03
|
|
|
0.03
|
|
|
0.16
|
|
|
0.20
|
|
|
Net income
(loss)
|
$
|
0.46
|
|
$
|
0.32
|
|
$
|
1.62
|
|
$
|
1.48
|
|
|
Cash dividends
paid per share
|
$
|
0.1875
|
|
$
|
0.1850
|
|
$
|
0.7500
|
|
$
|
0.7400
|
|
|
Ending book value
per share
|
|
|
|
|
|
|
$
|
17.20
|
|
$
|
15.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Unaudited; All amounts in this report are stated in millions except
per share data and percentages.
|
|
The preceding table shows both operating and net income to
highlight the effects of realized investment gains or losses on
period-to-period earnings comparisons. Management uses operating
income, a non-GAAP financial measure, to evaluate and better
explain operating performance, believing that the 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 recognition of realized investment gains or losses can be
highly discretionary due to such factors as the timing of
individual securities sales, the recording of estimated losses from
write-downs of impaired securities, tax-planning considerations,
and changes in investment management judgments regarding the
direction of securities markets or the future prospects of
individual investees or industry sectors. In recent years, asset
management operations have in part been reoriented toward an
enhancement of income from interest and dividends. This strategy
has led to a minimization of non-income producing or low-yielding
securities. Proceeds from such securities' sales and maturities, as
well as newly investable funds have largely been directed to
purchases of higher yielding common shares of American companies
with distinguished long-term records of earnings and dividend
growth. More recently the Company has allotted greater investable
funds to tax exempt issues which tend to generate pretax yields
lower than those of fully taxable corporate or U.S. Government
fixed maturity securities.
General Insurance
Results – The table below shows the major elements effecting
general insurance performance for the periods reported
upon.
|
|
General Insurance
Group
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
Net premiums
earned
|
$
|
743.5
|
|
$
|
737.4
|
|
0.8%
|
|
$
|
2,936.3
|
|
$
|
2,894.7
|
|
1.4%
|
Net investment
income
|
|
78.5
|
|
|
80.5
|
|
-2.5
|
|
|
312.1
|
|
|
312.1
|
|
-
|
Other
income
|
|
25.6
|
|
|
26.6
|
|
-4.0
|
|
|
106.2
|
|
|
106.3
|
|
-0.1
|
Operating
revenues
|
|
847.6
|
|
|
844.7
|
|
0.3
|
|
|
3,354.7
|
|
|
3,313.3
|
|
1.3
|
Benefits and claim
costs
|
|
547.5
|
|
|
555.0
|
|
-1.3
|
|
|
2,143.1
|
|
|
2,143.5
|
|
-
|
Sales and general
expenses
|
|
208.3
|
|
|
205.1
|
|
1.6
|
|
|
833.9
|
|
|
786.6
|
|
6.0
|
Interest and other
costs
|
|
14.8
|
|
|
12.3
|
|
20.5
|
|
|
57.6
|
|
|
46.6
|
|
23.7
|
Total operating
expenses
|
|
770.7
|
|
|
772.4
|
|
-0.2
|
|
|
3,034.7
|
|
|
2,976.8
|
|
1.9
|
Pretax operating
income (loss) (*)
|
$
|
76.8
|
|
$
|
72.2
|
|
6.4%
|
|
$
|
319.9
|
|
$
|
336.4
|
|
-4.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit and claim
ratio
|
|
73.6%
|
|
|
75.3%
|
|
|
|
|
73.0%
|
|
|
74.1%
|
|
|
Expense
ratio
|
|
24.6
|
|
|
24.2
|
|
|
|
|
24.8
|
|
|
23.5
|
|
|
Composite underwriting
ratio
|
|
98.2%
|
|
|
99.5%
|
|
|
|
|
97.8%
|
|
|
97.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) In connection
with the run-off mortgage guaranty ("MI") and consumer credit
indemnity ("CCI") combination, $7.5 and $33.8 of pretax operating
losses for the fourth quarter and full year 2016, and $21.2 and
$58.6 of pretax operating losses for the respective periods of
2015, 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.
|
General insurance pretax operating earnings for 2016 and the
final quarter of the year were marked by reasonably stable
underwriting and investment income contributions.
2016 earned premiums were basically level with the preceding
year's production with trends unevenly distributed among various
insurance coverages. Low to mid-single digit gains were experienced
in commercial automobile (trucking) and national accounts, as well
as other coverages such as home warranty. Premium volume from a new
underwriting facility established in early 2015 also added
measurably to earned premiums in 2016. In other regards, 2016
premium levels were hindered by lower volume in a large account
contractors book of business operating in a particularly
competitive environment, and by reduced production in the energy
services field.
Consolidated general insurance benefit and claim costs were
reasonably stable during 2016. Unfavorable developments of reserves
established in prior years nonetheless added 1.7 and 0.3 percentage
points to the benefit and claim ratio of the final quarter and all
of 2016, respectively. By contrast, claim ratios for 2015 were
inclusive of 3.0 and 1.5 percentage point additions arising from
unfavorable developments in the final quarter and year,
respectively. Slightly higher sales and general expense ratios in
2016 resulted mostly from greater costs incurred in the above-noted
underwriting facility, additional litigation cost provisions in the
year's second quarter, and by a slightly different premium mix and
attendant production costs associated with the business' responses
to recurring changes in insurance market conditions and
opportunities.
In management's opinion, quarterly or year-to-date fluctuations
in reported benefit and claim ratios are not particularly
meaningful in evaluating trends in Old Republic's long-term
liability-oriented mix of insurance business. Absent significant
economic and insurance industry dislocations in the foreseeable
future, management currently anticipates that recent years'
uptrends in these ratios should abate and revert gradually to
long-term targeted annual averages in the high 60%s to low
70%s.
Title Insurance
Results – The table below shows the major operating elements
effecting this segment's posting of all-time earnings records in
the final quarter and full year 2016.
|
|
Title Insurance
Group
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
Net premiums and fees
earned
|
$
|
619.4
|
|
$
|
547.4
|
|
13.2%
|
|
$
|
2,206.6
|
|
$
|
2,045.3
|
|
7.9%
|
Net investment
income
|
|
9.2
|
|
|
9.1
|
|
0.3
|
|
|
36.2
|
|
|
34.0
|
|
6.3
|
Other
income
|
|
0.2
|
|
|
0.2
|
|
-23.8
|
|
|
1.2
|
|
|
1.3
|
|
-7.8
|
Operating
revenues
|
|
628.9
|
|
|
556.9
|
|
12.9
|
|
|
2,244.1
|
|
|
2,080.7
|
|
7.9
|
Claim
costs
|
|
2.5
|
|
|
18.3
|
|
-86.2
|
|
|
84.3
|
|
|
99.2
|
|
-15.0
|
Sales and general
expenses
|
|
538.8
|
|
|
488.5
|
|
10.3
|
|
|
1,941.8
|
|
|
1,807.0
|
|
7.5
|
Interest and other
costs
|
|
1.8
|
|
|
1.8
|
|
1.6
|
|
|
7.6
|
|
|
7.5
|
|
1.8
|
Total operating
expenses
|
|
543.2
|
|
|
508.7
|
|
6.8
|
|
|
2,033.8
|
|
|
1,913.8
|
|
6.3
|
Pretax operating
income (loss)
|
$
|
85.6
|
|
$
|
48.1
|
|
77.9%
|
|
$
|
210.2
|
|
$
|
166.8
|
|
26.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claim
ratio
|
|
0.4%
|
|
|
3.4%
|
|
|
|
|
3.8%
|
|
|
4.9%
|
|
|
Expense
ratio
|
|
86.9
|
|
|
89.2
|
|
|
|
|
87.9
|
|
|
88.3
|
|
|
Composite underwriting
ratio
|
|
87.3%
|
|
|
92.6%
|
|
|
|
|
91.7%
|
|
|
93.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The continuation of a favorable mortgage rate environment and
generally improving housing and commercial property markets led to
higher revenues from title premiums and fees in 2016. This was
achieved in spite of the adverse effects that government-imposed
mortgage disclosure rules, implemented during the last quarter of
2015, have had on the consummation of real estate transactions
nationally.
As the above table shows, 2016 operations registered a further
expansion of underwriting margins. Claim ratios trended down in the
face of declining claims activity since the Great Recession years
and from favorable developments of reserves established in prior
years. These developments lowered 2016 claim ratios by 3.8 and 1.1
percentage points in the fourth quarter and entire year,
respectively. For the same periods of 2015 these reductions
amounted to 1.8 and 0.6 percentage points, respectively. The
operating expense ratio for these periods remained generally
aligned with premiums and fees levels.
Please see next page for the continuing
report
RFIG Run-off
Business Results – The table below shows the key operating
elements of this run-off book of business and their contributions
to combined MI and CCI results.
|
|
RFIG Run-off
Business
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
A. Mortgage
Insurance (MI)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums
earned
|
$
|
34.3
|
|
$
|
43.6
|
|
-21.4%
|
|
$
|
154.1
|
|
$
|
195.9
|
|
-21.3%
|
Net investment
income
|
|
5.3
|
|
|
5.8
|
|
-7.2
|
|
|
22.0
|
|
|
24.2
|
|
-8.9
|
Claim
costs
|
|
18.4
|
|
|
15.7
|
|
17.1
|
|
|
52.5
|
|
|
110.5
|
|
-52.4
|
Pretax operating
income (loss)
|
$
|
17.1
|
|
$
|
28.6
|
|
-40.1%
|
|
$
|
105.0
|
|
$
|
89.9
|
|
16.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claim
ratio
|
|
53.7%
|
|
|
36.0%
|
|
|
|
|
34.1%
|
|
|
56.4%
|
|
|
Expense
ratio
|
|
12.0
|
|
|
11.6
|
|
|
|
|
12.0
|
|
|
10.1
|
|
|
Composite underwriting
ratio
|
|
65.7%
|
|
|
47.6%
|
|
|
|
|
46.1%
|
|
|
66.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B. Consumer Credit
Insurance (CCI)
|
|
|
|
|
|
|
|
|
Net premiums
earned
|
$
|
4.6
|
|
$
|
5.9
|
|
-21.5%
|
|
$
|
15.8
|
|
$
|
23.9
|
|
-33.8%
|
Net investment
income
|
|
0.3
|
|
|
0.2
|
|
32.2
|
|
|
1.1
|
|
|
0.8
|
|
31.3
|
Benefits and claim
costs
|
|
12.2
|
|
|
27.2
|
|
-55.1
|
|
|
50.0
|
|
|
83.0
|
|
-39.8
|
Pretax operating
income (loss) (*)
|
$
|
(7.8)
|
|
$
|
(21.6)
|
|
63.8%
|
|
$
|
(35.2)
|
|
$
|
(60.4)
|
|
41.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claim
ratio
|
|
264.0%
|
|
|
461.5%
|
|
|
|
|
315.9%
|
|
|
346.9%
|
|
|
Expense
ratio
|
|
11.9
|
|
|
9.7
|
|
|
|
|
13.9
|
|
|
9.2
|
|
|
Composite underwriting
ratio
|
|
275.9%
|
|
|
471.2%
|
|
|
|
|
329.8%
|
|
|
356.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Total MI and
CCI run-off business:
|
|
|
|
|
|
|
|
|
Net premiums
earned
|
$
|
38.9
|
|
$
|
49.6
|
|
-21.4%
|
|
$
|
170.0
|
|
$
|
219.9
|
|
-22.7%
|
Net investment
income
|
|
5.6
|
|
|
6.0
|
|
-5.7
|
|
|
23.2
|
|
|
25.1
|
|
-7.5
|
Benefits and claim
costs
|
|
30.6
|
|
|
43.0
|
|
-28.6
|
|
|
102.6
|
|
|
193.6
|
|
-47.0
|
Pretax operating
income (loss)
|
$
|
9.3
|
|
$
|
6.9
|
|
33.8%
|
|
$
|
69.8
|
|
$
|
29.4
|
|
136.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claim
ratio
|
|
78.7%
|
|
|
86.7%
|
|
|
|
|
60.4%
|
|
|
88.0%
|
|
|
Expense
ratio
|
|
12.0
|
|
|
11.4
|
|
|
|
|
12.2
|
|
|
10.0
|
|
|
Composite underwriting
ratio
|
|
90.7%
|
|
|
98.1%
|
|
|
|
|
72.6%
|
|
|
98.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) In connection
with the run-off mortgage guaranty ("MI") and consumer credit
indemnity ("CCI") combination, $7.5 and $33.8 of pretax operating
losses for the fourth quarter and full year 2016, and $21.2 and
$58.6 of pretax operating losses for the respective periods of
2015, 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.
|
Consistent with a run-off operating mode, further declines of
earned premiums were posted by the MI and CCI lines. MI investment
income was also lower as reduced premium volumes and ongoing claim
payments affected downward pressures on the invested asset
base.
Continued declines in reported delinquencies and the higher
rates at which reported mortgage loan defaults are cured or
otherwise resolved without payment have led to generally declining
claim costs and the related ratios to earned premiums for the past
four years. On a quarterly basis, these costs can be affected by
the fortuity of claim litigation costs and by uneven occurrences of
prior years' claim developments. In the latter regard favorable
developments of previously established claim reserves lowered claim
ratios by 24.7 and 39.8 percentage points in the final quarter and
all of 2016, respectively. For the same periods of 2015, the
percentage point reductions were 38.4 and 65.0, respectively.
In addition to a quickly declining premium base, operating
results for the much smaller CCI run-off line portray greater
quarter-to-quarter and annual volatility in claim costs and related
ratios. In 2016 and several prior years, the latter have been
particularly impacted by ongoing costs of a near-eight-year long
commercial dispute being litigated with Bank of America and its
acquired Countrywide mortgage banking subsidiaries.
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. The interplay of these various operating elements is
summarized in the following table:
|
|
Corporate and
Other Operations
|
|
Quarters
Ended
December
31,
|
|
Years
Ended
December
31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net premiums
earned
|
$
|
6.1
|
|
$
|
4.7
|
|
$
|
20.1
|
|
$
|
19.4
|
Net investment
income
|
|
6.5
|
|
|
3.9
|
|
|
15.4
|
|
|
17.2
|
Other
income
|
|
-
|
|
|
-
|
|
|
(0.1)
|
|
|
(0.9)
|
Operating
revenues
|
|
12.7
|
|
|
8.6
|
|
|
35.4
|
|
|
35.8
|
Benefits and claim
costs
|
|
4.9
|
|
|
7.9
|
|
|
17.7
|
|
|
22.8
|
Insurance
expenses
|
|
1.2
|
|
|
1.7
|
|
|
7.8
|
|
|
6.3
|
Corporate, interest
and other expenses - net
|
|
2.3
|
|
|
(0.7)
|
|
|
(3.2)
|
|
|
(1.1)
|
Total operating
expenses
|
|
8.5
|
|
|
8.8
|
|
|
22.4
|
|
|
28.1
|
Pretax operating
income (loss)
|
$
|
4.1
|
|
$
|
(0.2)
|
|
$
|
13.0
|
|
$
|
7.6
|
|
Consolidated
Results – The consolidated changes and occurrences in Old
Republic's segmented business for the periods reported upon are
shown below:
|
|
ORI
Consolidated
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
Net premiums and fees
earned
|
$
|
1,408.1
|
|
$
|
1,339.2
|
|
5.1%
|
|
$
|
5,333.2
|
|
$
|
5,179.4
|
|
3.0%
|
Net investment
income
|
|
100.0
|
|
|
99.7
|
|
0.2
|
|
|
387.0
|
|
|
388.6
|
|
-0.4
|
Other
income
|
|
25.8
|
|
|
26.8
|
|
-3.9
|
|
|
107.3
|
|
|
106.7
|
|
0.5
|
Operating
revenues
|
|
1,533.9
|
|
|
1,465.9
|
|
4.6
|
|
|
5,827.6
|
|
|
5,674.8
|
|
2.7
|
Benefits and claim
costs
|
|
585.7
|
|
|
624.3
|
|
-6.2
|
|
|
2,347.9
|
|
|
2,459.3
|
|
-4.5
|
Sales and general
expenses
|
|
755.9
|
|
|
703.5
|
|
7.5
|
|
|
2,816.3
|
|
|
2,633.0
|
|
7.0
|
Interest and other
costs
|
|
16.2
|
|
|
10.9
|
|
48.4
|
|
|
50.2
|
|
|
41.9
|
|
19.8
|
Total operating
expenses
|
|
1,357.9
|
|
|
1,338.7
|
|
1.4
|
|
|
5,214.5
|
|
|
5,134.3
|
|
1.6
|
Pretax operating
income (loss)
|
|
176.0
|
|
|
127.1
|
|
38.4
|
|
|
613.1
|
|
|
540.4
|
|
13.4
|
Income taxes
(credits)
|
|
53.6
|
|
|
45.8
|
|
17.1
|
|
|
193.5
|
|
|
177.7
|
|
8.9
|
Net operating income
(loss)
|
|
122.3
|
|
|
81.3
|
|
50.4
|
|
|
419.6
|
|
|
362.7
|
|
15.7
|
Realized investment
gains (losses)
|
|
14.7
|
|
|
14.2
|
|
3.2
|
|
|
72.8
|
|
|
91.3
|
|
-20.2
|
Income taxes
(credits) on realized investment gains (losses)
|
|
5.1
|
|
|
4.9
|
|
3.4
|
|
|
25.5
|
|
|
31.9
|
|
-20.2
|
Net realized
investment gains (losses)
|
|
9.5
|
|
|
9.2
|
|
3.1
|
|
|
47.3
|
|
|
59.3
|
|
-20.2
|
Net income
(loss)
|
$
|
131.9
|
|
$
|
90.6
|
|
45.6%
|
|
$
|
466.9
|
|
$
|
422.1
|
|
10.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claim
ratio
|
|
41.6%
|
|
|
46.6%
|
|
|
|
|
44.0%
|
|
|
47.5%
|
|
|
Expense
ratio
|
|
51.6
|
|
|
50.3
|
|
|
|
|
50.6
|
|
|
48.5
|
|
|
Composite underwriting
ratio
|
|
93.2%
|
|
|
96.9%
|
|
|
|
|
94.6%
|
|
|
96.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
operating cash flow
|
|
|
|
|
|
|
|
|
$
|
637.3
|
|
$
|
688.2
|
|
-7.4%
|
Consolidated operating cash flow was additive to investable
funds and operating needs in the amount of $637.3 and $688.2
for the years ended December 31, 2016
and 2015, respectively. Excluding inherently negative operating
cash flows in the MI and CCI run-off business, these amounts would
be $739.8 and $812.8, respectively.
The sum-total of Old Republic's segmented results is represented
by the following major components of pretax consolidated
income:
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
Pretax operating
income:
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
Underwriting and
related services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All segments except
RFIG
|
$
|
88.6
|
|
$
|
37.3
|
|
137.1%
|
|
$
|
229.7
|
|
$
|
189.4
|
|
21.3%
|
RFIG
run-off
|
|
3.6
|
|
|
0.9
|
|
N/M
|
|
|
46.6
|
|
|
4.3
|
|
N/M
|
Subtotal
|
|
92.2
|
|
|
38.3
|
|
140.8
|
|
|
276.3
|
|
|
193.7
|
|
42.6
|
Net investment
income
|
|
100.0
|
|
|
99.7
|
|
0.2
|
|
|
387.0
|
|
|
388.6
|
|
-0.4
|
Interest and other
costs
|
|
(16.2)
|
|
|
(10.9)
|
|
48.4
|
|
|
(50.2)
|
|
|
(41.9)
|
|
19.8
|
Total
|
|
176.0
|
|
|
127.1
|
|
38.4
|
|
|
613.1
|
|
|
540.4
|
|
13.4
|
Realized investment
gains(losses)
|
|
14.7
|
|
|
14.2
|
|
3.2
|
|
|
72.8
|
|
|
91.3
|
|
-20.2
|
Consolidated pretax
income
|
$
|
190.7
|
|
$
|
141.4
|
|
34.9%
|
|
$
|
686.0
|
|
$
|
631.8
|
|
8.6%
|
|
Cash, Invested
Assets, and Shareholders' Equity – The table below shows 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
|
|
|
December
31,
|
|
Dec. '16/
|
|
Dec. '15/
|
|
|
2016
|
|
2015
|
|
2014
|
|
Dec. '15
|
|
Dec. '14
|
Cash and invested
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
carried at fair value
|
|
$
|
12,021.0
|
|
$
|
11,119.6
|
|
$
|
11,291.6
|
|
8.1%
|
|
-1.5%
|
Held to maturity
carried at amortized cost
|
|
|
974.8
|
|
|
355.8
|
|
|
-
|
|
173.9%
|
|
N/A
|
Total per balance
sheet
|
|
$
|
12,995.8
|
|
$
|
11,475.5
|
|
$
|
11,291.6
|
|
13.2%
|
|
1.6%
|
Original cost basis of
all
|
|
$
|
12,360.3
|
|
$
|
11,284.5
|
|
$
|
10,717.9
|
|
9.5%
|
|
5.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
Total
|
|
$
|
4,471.6
|
|
$
|
3,880.8
|
|
$
|
3,924.0
|
|
15.2%
|
|
-1.1%
|
|
Per common
share
|
|
$
|
17.20
|
|
$
|
15.02
|
|
$
|
15.15
|
|
14.5%
|
|
-0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition of
shareholders' equity per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity before items
below
|
|
$
|
15.96
|
|
$
|
14.91
|
|
$
|
14.02
|
|
7.0%
|
|
6.3%
|
Unrealized investment
gains (losses) and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
comprehensive income (loss)
|
|
|
1.24
|
|
|
0.11
|
|
|
1.13
|
|
|
|
|
Total
|
|
$
|
17.20
|
|
$
|
15.02
|
|
$
|
15.15
|
|
14.5%
|
|
-0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmented
composition of
shareholders' equity per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding run-off
segment
|
|
$
|
15.93
|
|
$
|
14.06
|
|
$
|
14.35
|
|
13.3%
|
|
-2.0%
|
RFIG run-off
segment
|
|
|
1.27
|
|
|
0.96
|
|
|
0.80
|
|
|
|
|
Consolidated
total
|
|
$
|
17.20
|
|
$
|
15.02
|
|
$
|
15.15
|
|
14.5%
|
|
-0.9%
|
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 the insurance subsidiaries'
long-term obligations to policyholders and other beneficiaries, as
well as the long-term stability of the subsidiaries' capital
accounts. To this end, the investment portfolio contains no
significant insurance risk-correlated asset exposures to real
estate, mortgage-backed securities, collateralized debt obligations
("CDO's"), derivatives, hybrid securities, or illiquid private
equity investments. Moreover, the Company does not engage in
hedging or securities lending transactions, nor does it invest in
securities whose values are predicated on non-regulated financial
instruments exhibiting amorphous or unfunded counter-party risk
attributes.
As of December 31, 2016, the
consolidated investment portfolio reflected an allocation of
approximately 77 percent to fixed-maturity and short-term
investments, and 23 percent to equities. Investments in high
quality, dividend-paying equity securities have been singularly
emphasized since 2013, and the asset quality of the fixed maturity
portfolio has remained at high levels.
Changes in shareholders' equity per share are shown in the
following table. As indicated, these resulted mostly from net
income, dividend payments to shareholders, and changes in the value
of invested assets carried at fair value in the periods reported
upon.
|
|
Shareholders'
Equity Per Share
|
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
2014
|
Beginning
balance
|
|
$
|
15.02
|
|
$
|
15.15
|
|
$
|
14.64
|
Changes in
shareholders' equity:
|
|
|
|
|
|
|
|
|
|
Net operating income
(loss)
|
|
|
1.62
|
|
|
1.40
|
|
|
0.90
|
Net realized
investment gains (losses):
|
|
|
|
|
|
|
|
|
|
From sales
|
|
|
0.19
|
|
|
0.23
|
|
|
0.68
|
From
impairments
|
|
|
(0.01)
|
|
|
-
|
|
|
-
|
Subtotal
|
|
|
0.18
|
|
|
0.23
|
|
|
0.68
|
Net unrealized
investment gains (losses)
|
|
|
1.12
|
|
|
(0.96)
|
|
|
(0.08)
|
Total realized and
unrealized investment gains (losses)
|
|
|
1.30
|
|
|
(0.73)
|
|
|
0.60
|
Cash
dividends
|
|
|
(0.75)
|
|
|
(0.74)
|
|
|
(0.73)
|
Stock issuance,
foreign exchange, and other transactions
|
|
|
0.01
|
|
|
(0.06)
|
|
|
(0.26)
|
Net change
|
|
|
2.18
|
|
|
(0.13)
|
|
|
0.51
|
Ending
balance
|
|
$
|
17.20
|
|
$
|
15.02
|
|
$
|
15.15
|
Percentage change for
the period
|
|
|
14.5%
|
|
|
-0.9%
|
|
|
3.5%
|
|
Capitalization
– As shown in the following table, Old Republic's
capitalization rose in 2016 as a result of a new debt issue and a
greater shareholders' equity balance.
|
|
|
Capitalization
(*)
|
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
2014
|
Debt:
|
|
|
|
|
|
|
|
|
|
3.75% Convertible
Senior Notes due 2018
|
|
$
|
547.8
|
|
$
|
546.0
|
|
$
|
544.1
|
4.875% Senior Notes
due 2024
|
|
|
395.6
|
|
|
395.1
|
|
|
394.5
|
3.875% Senior Notes
due 2026
|
|
|
544.6
|
|
|
-
|
|
|
-
|
ESSOP debt with an
average yield of 4.0%
|
|
|
8.1
|
|
|
11.7
|
|
|
15.0
|
Other miscellaneous
debt with an average yield of 1.9%
|
|
|
32.4
|
|
|
-
|
|
|
-
|
Total debt
|
|
|
1,528.7
|
|
|
952.8
|
|
|
953.7
|
Common shareholders'
equity
|
|
|
4,471.6
|
|
|
3,880.8
|
|
|
3,924.0
|
Total
capitalization
|
|
$
|
6,000.4
|
|
$
|
4,833.7
|
|
$
|
4,877.8
|
|
|
|
|
|
|
|
|
|
|
Capitalization
ratios:
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
25.5%
|
|
|
19.7%
|
|
|
19.7%
|
Common shareholders'
equity
|
|
|
74.5
|
|
|
80.3
|
|
|
80.3
|
Total
|
|
|
100.0%
|
|
|
100.0%
|
|
|
100.0%
|
|
(*) Certain debt
amounts have been reduced due to the reclassification of relatively
immaterial debt issuance costs previously classified as deferred
assets, in order to comply with a 2015 pronouncement by the
Financial Accounting Standards Board.
|
|
|
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 various insurance products are
set without certainty of the ultimate benefit and claim costs that
will emerge or be incurred, often many years after issuance and
expiration of a policy. Old Republic's business is therefore
conducted with a primary focus on achieving favorable underwriting
results over cycles, and on the maintenance of financial soundness
in support of its insurance subsidiaries' long-term obligations to
insurance beneficiaries.
In this light, the Company's affairs are managed for the long
run and without significant regard to the arbitrary strictures of
quarterly or even annual reporting periods that American industry
must observe. In Old Republic's view, such short reporting time
frames do not comport well with the long-term nature of much of its
business. Management therefore believes that the Company's
operating results and financial condition can best be evaluated by
observing underwriting and overall operating performance trends
over succeeding five- or preferably ten-year intervals. A ten-year
period in particular can likely encompass at least one economic
and/or underwriting cycle and thereby provide an appropriate time
frame for such cycle to run its course, and for premium rate
changes and reserved claim costs to be quantified and emerge in
financial results with greater finality and effect.
Accompanying Financial Data:
- Summary Financial Statements and Common Stock Statistics
- About Old Republic
- Safe Harbor Statement
Financial Supplement
A financial supplement to this
news release is available on the Company's website.
Old Republic
International Corporation
|
|
|
|
|
SummaryFinancial Statements and Common
Stock Statistics (Unaudited)
|
|
|
|
|
|
|
December
31,
|
SUMMARY BALANCE
SHEETS:
|
|
2016
|
|
2015
|
Assets:
|
|
|
|
|
|
|
Cash and fixed maturity
securities
|
|
$
|
9,973.1
|
|
$
|
9,366.7
|
Equity
securities
|
|
|
2,896.1
|
|
|
1,987.8
|
Other invested
assets
|
|
|
126.5
|
|
|
120.9
|
Cash and invested
assets
|
|
|
12,995.8
|
|
|
11,475.5
|
Accounts and premiums
receivable
|
|
|
1,390.2
|
|
|
1,310.2
|
Federal income tax
recoverable:
|
Current
|
|
|
14.9
|
|
|
26.5
|
|
Deferred
|
|
|
-
|
|
|
154.5
|
Prepaid federal income
taxes
|
|
|
82.4
|
|
|
63.3
|
Reinsurance balances
recoverable
|
|
|
3,231.5
|
|
|
3,183.6
|
Sundry
assets
|
|
|
876.5
|
|
|
887.8
|
Total
|
|
$
|
18,591.6
|
|
$
|
17,101.6
|
Liabilities and
Shareholders' Equity:
|
|
|
|
|
|
|
Policy
liabilities
|
|
$
|
2,035.0
|
|
$
|
1,945.1
|
Benefit and claim
reserves
|
|
|
9,206.0
|
|
|
9,120.2
|
Federal income tax
payable:
|
Deferred
|
|
|
42.6
|
|
|
-
|
Debt
|
|
|
1,528.7
|
|
|
952.8
|
Sundry
liabilities
|
|
|
1,307.4
|
|
|
1,202.5
|
Shareholders'
equity
|
|
|
4,471.6
|
|
|
3,880.8
|
Total
|
|
$
|
18,591.6
|
|
$
|
17,101.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUMMARY INCOME
STATEMENTS:
|
|
Quarters Ended December
31,
|
|
Years Ended December
31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net premiums and fees
earned
|
|
$
|
1,408.1
|
|
$
|
1,339.2
|
|
$
|
5,333.2
|
|
$
|
5,179.4
|
Net investment
income
|
|
|
100.0
|
|
|
99.7
|
|
|
387.0
|
|
|
388.6
|
Other income
|
|
|
25.8
|
|
|
26.8
|
|
|
107.3
|
|
|
106.7
|
Net realized investment
gains (losses)
|
|
|
14.7
|
|
|
14.2
|
|
|
72.8
|
|
|
91.3
|
Total
revenues
|
|
|
1,548.7
|
|
|
1,480.2
|
|
|
5,900.5
|
|
|
5,766.1
|
Benefits and
claims
|
|
|
585.7
|
|
|
624.3
|
|
|
2,347.9
|
|
|
2,459.3
|
Sales and general
expenses
|
|
|
755.9
|
|
|
703.5
|
|
|
2,816.3
|
|
|
2,633.0
|
Interest and other
costs
|
|
|
16.2
|
|
|
10.9
|
|
|
50.2
|
|
|
41.9
|
Total
expenses
|
|
|
1,357.9
|
|
|
1,338.7
|
|
|
5,214.5
|
|
|
5,134.3
|
Pretax income
(loss)
|
|
|
190.7
|
|
|
141.4
|
|
|
686.0
|
|
|
631.8
|
Income taxes
(credits)
|
|
|
58.7
|
|
|
50.7
|
|
|
219.0
|
|
|
209.6
|
Net income
(loss)
|
|
$
|
131.9
|
|
$
|
90.6
|
|
$
|
466.9
|
|
$
|
422.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCK
STATISTICS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss):
|
Basic
|
|
$
|
.51
|
|
$
|
.35
|
|
$
|
1.80
|
|
$
|
1.63
|
|
Diluted
|
|
$
|
.46
|
|
$
|
.32
|
|
$
|
1.62
|
|
$
|
1.48
|
Components of earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic, net operating
income (loss)
|
|
$
|
.47
|
|
$
|
.31
|
|
$
|
1.62
|
|
$
|
1.40
|
Realized investment
gains (losses)
|
|
|
.04
|
|
|
.04
|
|
|
.18
|
|
|
.23
|
Basic net income
(loss)
|
|
$
|
.51
|
|
$
|
.35
|
|
$
|
1.80
|
|
$
|
1.63
|
Diluted, net operating
income (loss)
|
|
$
|
.43
|
|
$
|
.29
|
|
$
|
1.46
|
|
$
|
1.28
|
Realized investment
gains (losses)
|
|
|
.03
|
|
|
.03
|
|
|
.16
|
|
|
.20
|
Diluted net income
(loss)
|
|
$
|
.46
|
|
$
|
.32
|
|
$
|
1.62
|
|
$
|
1.48
|
Cash dividends on
common stock
|
|
$
|
.1875
|
|
$
|
.1850
|
|
$
|
.7500
|
|
$
|
.7400
|
Book value per
share
|
|
|
|
|
|
|
|
$
|
17.20
|
|
$
|
15.02
|
Common shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
basic
|
|
|
259,711,126
|
|
|
258,257,224
|
|
|
259,429,298
|
|
|
259,502,067
|
Average
diluted
|
|
|
296,583,195
|
|
|
295,206,909
|
|
|
296,379,251
|
|
|
296,088,963
|
Actual, end of
period
|
|
|
|
|
|
|
|
|
259,906,378
|
|
|
258,459,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUMMARY STATEMENTS
OF COMPREHENSIVE INCOME (LOSS):
|
|
|
|
|
|
|
Net income (loss) as
reported
|
|
$
|
131.9
|
|
$
|
90.6
|
|
$
|
466.9
|
|
$
|
422.1
|
Post-tax net unrealized
gains (losses)
|
|
|
(57.9)
|
|
|
(26.3)
|
|
|
292.1
|
|
|
(248.9)
|
Other
adjustments
|
|
|
(5.2)
|
|
|
(.1)
|
|
|
2.2
|
|
|
(14.2)
|
Net
adjustments
|
|
|
(63.1)
|
|
|
(26.5)
|
|
|
294.4
|
|
|
(263.1)
|
Comprehensive income
(loss)
|
|
$
|
68.8
|
|
$
|
64.0
|
|
$
|
761.4
|
|
$
|
159.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
$18.59 billion and common
shareholders' equity of $4.47
billion, or $17.20 per share.
Its current stock market valuation is approximately $5.14 billion, or $19.57 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 2016, the
Company's total market return, with dividends reinvested, has grown
at a compounded annual rate of 10.0 percent per share. For the same
period, the total market return, with dividends reinvested, for the
S&P 500 Index has grown at a 9.2 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
9.5 percent per share, and the regular cash dividend has grown at a
9.0 percent annual compound rate. According to the most recent
edition of Mergent's Dividend Achievers, Old Republic is one of
just 96 qualifying companies, out of thousands considered, that
have posted at least 25 consecutive years of annual dividend
growth.
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 fourth quarter 2016 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
888-428-9473.
Interested parties may also listen to a replay of the
call through February 2, 2017 by
dialing 844-512-2921, passcode 3555042, or by accessing it on Old
Republic International's website through February 26, 2017.
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
2015 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
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
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/old-republic-reports-results-for-the-fourth-quarter-and-full-year-2016-300397252.html
SOURCE Old Republic International Corporation