Old Republic Reports Results For The Third Quarter And First Nine Months Of 2021
Old Republic International Corporation (NYSE: ORI) reported mixed financial results for Q3 and the first nine months of 2021. Pretax income decreased to $106 million from $307 million year-over-year, while net income fell to $89 million from $246 million. However, the company saw a strong increase in operating performance, with net income excluding investment gains rising by 32% in Q3. Net premiums and fees earned grew by 18.6% for the quarter and 21.7% for nine months. Book value per share improved to $20.96, highlighting ongoing long-term growth strategies.
- Net premiums and fees earned increased 18.6% for Q3 and 21.7% year-to-date.
- Net income excluding investment gains rose by 31.9% for Q3 and 49.4% year-to-date.
- Shareholders' equity as of September 30, 2021, increased to $6.33 billion.
- Pretax income decreased by 65.5% year-over-year for Q3.
- Net income fell 64.1% for Q3 compared to the same period in 2020.
- Investment losses of $192.6 million impacted overall profitability.
CHICAGO, Oct. 28, 2021 /PRNewswire/ -- Old Republic International Corporation (NYSE: ORI) today reported the following consolidated results (a):
OVERALL RESULTS | ||||||||||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||||||||
Pretax income (loss) | $ | 106.0 | $ | 306.9 | $ | 1,132.6 | $ | 36.1 | ||||||||||||||
Pretax investment gains (losses) | (192.6) | 80.7 | 303.7 | (516.7) | ||||||||||||||||||
Pretax income (loss) excluding investment gains (losses) | $ | 298.6 | $ | 226.2 | 32.0 | % | $ | 828.8 | $ | 552.8 | 49.9 | % | ||||||||||
Net income (loss) | $ | 88.7 | $ | 246.0 | $ | 907.3 | $ | 38.9 | ||||||||||||||
Net of tax investment gains (losses) | (151.6) | 63.7 | 239.6 | (408.0) | ||||||||||||||||||
Net income (loss) excluding investment gains (losses) | $ | 240.4 | $ | 182.3 | 31.9 | % | $ | 667.6 | $ | 446.9 | 49.4 | % | ||||||||||
PER DILUTED SHARE | ||||||||||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||||||||
Net income (loss) | $ | .29 | $ | .83 | $ | 3.00 | $ | .13 | ||||||||||||||
Net of tax investment gains (losses) | (.50) | .21 | .79 | (1.37) | ||||||||||||||||||
Net income (loss) excluding investment gains (losses) | $ | .79 | $ | .62 | 27.4 | % | $ | 2.21 | $ | 1.50 | 47.3 | % | ||||||||||
SHAREHOLDERS' EQUITY | ||||||||||||||||||||||
Sept. 30, | Dec. 31, | |||||||||||||||||||||
2021 | 2020 | % Change | ||||||||||||||||||||
Total | $ | 6,329.4 | $ | 6,186.6 | 2.3 | % | ||||||||||||||||
Per Common Share | $ | 20.96 | $ | 20.75 | 1.0 | % | ||||||||||||||||
(a) All amounts in this report are stated in millions except common stock data and percentages. | ||||||||||||||||||||||
Consolidated pretax income, excluding investment gains or losses continued to show strong growth in profitability in the General Insurance and Title Insurance businesses. Solid underwriting results produced consolidated combined ratios of
Consolidated net premiums and fees earned increased
Book value per share advanced to
As the economy continues to emerge from the pandemic, premium and fee revenues in General Insurance could continue growing. As low interest rates and a favorable real estate market continue, Title Insurance premium and fee revenues could remain strong, although may be lower than recent periods.
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 primary needs of the insurance subsidiaries' underwriting and related services business. In this view, the evaluation of periodic and long-term results excludes consideration of all investment gains and (losses). Under Generally Accepted Accounting Principles (GAAP), however, net income (loss), which includes all specifically defined realized and unrealized investment gains and (losses), is the measure of total profitability.
In management's opinion, the focus on income (loss) excluding all investment gains and losses provides a better way to realistically analyze, evaluate, and establish accountability for the results and benefits that arise from the basic operations of the business. The inclusion of realized investment gains and (losses) in net income (loss) can mask the reality and trends in the fundamental operating results of the insurance business. That is because their realization is, more often than not, highly discretionary. It is usually affected by the timing of individual securities sales, tax-planning considerations, and modifications of investment management judgments about the direction of securities markets or the prospects of individual investees or industry sectors. Moreover, the inclusion of unrealized investment gains and (losses) in equity securities can further distort such operating results and trends therein and thus lead to even greater period-to-period fluctuations in reported net income (loss). The impact of the continuous volatility in stock market valuations is most evident in its net of tax effect on net income (loss) for the periods reported upon.
FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
SUMMARY INCOME STATEMENTS (a): | 2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||||||||
Revenues: | |||||||||||||||||||||||
Net premiums and fees earned | $ | 2,055.4 | $ | 1,732.8 | 18.6 | % | $ | 5,881.6 | $ | 4,831.6 | 21.7 | % | |||||||||||
Net investment income | 111.6 | 106.4 | 4.9 | 323.6 | 329.3 | -1.7 | |||||||||||||||||
Other income | 37.8 | 31.7 | 19.2 | 112.0 | 98.5 | 13.7 | |||||||||||||||||
Total operating revenues | 2,204.9 | 1,871.0 | 17.8 | 6,317.3 | 5,259.5 | 20.1 | |||||||||||||||||
Investment gains (losses): | |||||||||||||||||||||||
Realized from actual transactions | 6.6 | 1.4 | 15.6 | 12.7 | |||||||||||||||||||
Unrealized from changes in fair value of equity securities | (199.3) | 79.2 | 288.1 | (529.4) | |||||||||||||||||||
Total investment gains (losses) | (192.6) | 80.7 | 303.7 | (516.7) | |||||||||||||||||||
Total revenues | 2,012.2 | 1,951.7 | 6,621.0 | 4,742.8 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Claim costs | 618.4 | 638.1 | -3.1 | 1,846.8 | 1,884.8 | -2.0 | |||||||||||||||||
Sales and general expenses | 1,270.8 | 997.1 | 27.5 | 3,601.8 | 2,789.8 | 29.1 | |||||||||||||||||
Interest and other charges | 16.8 | 9.5 | 77.8 | 39.7 | 31.8 | 24.6 | |||||||||||||||||
Total operating expenses | 1,906.2 | 1,644.7 | 15.9 | % | 5,488.4 | 4,706.6 | 16.6 | % | |||||||||||||||
Pretax income (loss) | 106.0 | 306.9 | 1,132.6 | 36.1 | |||||||||||||||||||
Income taxes (credits) | 17.2 | 60.9 | 225.2 | (2.7) | |||||||||||||||||||
Net income (loss) | $ | 88.7 | $ | 246.0 | $ | 907.3 | $ | 38.9 | |||||||||||||||
COMMON STOCK STATISTICS: | |||||||||||||||||||||||
Components of net income (loss) per share: | |||||||||||||||||||||||
Basic net income (loss) excluding investment gains (losses) | $ | 0.79 | $ | 0.62 | 27.4 | % | $ | 2.22 | $ | 1.50 | 48.0 | % | |||||||||||
Net investment gains (losses): | |||||||||||||||||||||||
Realized from actual transactions | 0.02 | — | 0.04 | 0.03 | |||||||||||||||||||
Unrealized from changes in fair value of equity securities | (0.52) | 0.21 | 0.75 | (1.40) | |||||||||||||||||||
Basic net income (loss) | $ | 0.29 | $ | 0.83 | $ | 3.01 | $ | 0.13 | |||||||||||||||
Diluted net income (loss) excluding investment gains (losses) | $ | 0.79 | $ | 0.62 | 27.4 | % | $ | 2.21 | $ | 1.50 | 47.3 | % | |||||||||||
Net investment gains (losses): | |||||||||||||||||||||||
Realized from actual transactions | 0.02 | — | 0.04 | 0.03 | |||||||||||||||||||
Unrealized from changes in fair value of equity securities | (0.52) | 0.21 | 0.75 | (1.40) | |||||||||||||||||||
Diluted net income (loss) | $ | 0.29 | $ | 0.83 | $ | 3.00 | $ | 0.13 | |||||||||||||||
Cash dividends on common stock | $ | 1.72 | $ | 0.21 | $ | 2.16 | $ | 0.63 | |||||||||||||||
Book value per share | $ | 20.96 | $ | 20.39 | 2.8 | % | |||||||||||||||||
(a) Certain reclassification adjustments were made to increase net premiums and fees earned with a corresponding increase to sales and general expenses in the quarter and first nine months ended September 30, 2020 to conform the prior period to the current presentation. See Note (a) in Title Insurance Segment Results on page (5). | |||||||||||||||||||||||
Management believes the information in sections A to G and J of the table on the following page highlight the most meaningful, realistic indicators of ORI's segmented and consolidated financial performance. The information underscores the necessity of reviewing reported results by separating the inherent volatility of securities markets and their above-noted impact on reported net income (loss).
Major Segmented and Consolidated Elements of Income (Loss) | |||||||||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||
A. Net premiums, fees, and other income (c): | |||||||||||||||||||||
General insurance | $ | 902.8 | $ | 861.9 | 4.7 | % | $ | 2,629.2 | $ | 2,532.8 | 3.8 | % | |||||||||
Title insurance | 1,142.1 | 857.0 | 33.3 | 3,218.7 | 2,254.5 | 42.8 | |||||||||||||||
Corporate and other | 2.6 | 2.9 | -9.0 | 8.2 | 9.0 | -9.2 | |||||||||||||||
Other income | 37.8 | 31.7 | 19.2 | 112.0 | 98.5 | 13.7 | |||||||||||||||
Subtotal | 2,085.5 | 1,753.7 | 18.9 | 5,968.1 | 4,895.0 | 21.9 | |||||||||||||||
RFIG run-off business | 7.7 | 10.8 | -28.8 | 25.4 | 35.1 | -27.5 | |||||||||||||||
Consolidated | $ | 2,093.2 | $ | 1,764.6 | 18.6 | % | $ | 5,993.6 | $ | 4,930.2 | 21.6 | % | |||||||||
B. Underwriting and related services income (loss): | |||||||||||||||||||||
General insurance | $ | 77.7 | $ | 38.7 | 100.7 | % | $ | 202.0 | $ | 89.5 | 125.6 | % | |||||||||
Title insurance | 125.3 | 93.2 | 34.4 | 347.8 | 182.3 | 90.8 | |||||||||||||||
Corporate and other | (4.9) | (3.7) | -31.9 | (17.1) | (12.6) | -35.0 | |||||||||||||||
Subtotal | 198.0 | 128.2 | 54.5 | 532.7 | 259.2 | 105.5 | |||||||||||||||
RFIG run-off business | 5.8 | 1.1 | N/M | 12.1 | (3.7) | N/M | |||||||||||||||
Consolidated | $ | 203.9 | $ | 129.3 | 57.7 | % | $ | 544.9 | $ | 255.4 | 113.4 | % | |||||||||
C. Consolidated underwriting ratio (c): | |||||||||||||||||||||
Claim ratio: | |||||||||||||||||||||
Current year | 32.4 | % | 38.2 | % | 33.4 | % | 39.9 | % | |||||||||||||
Prior years | (2.3) | (1.4) | (2.0) | (.9) | |||||||||||||||||
Total | 30.1 | 36.8 | 31.4 | 39.0 | |||||||||||||||||
Expense ratio | 59.7 | 55.5 | 59.0 | 55.4 | |||||||||||||||||
Combined ratio | 89.8 | % | 92.3 | % | 90.4 | % | 94.4 | % | |||||||||||||
D. Net investment income: | |||||||||||||||||||||
General insurance | $ | 84.2 | $ | 85.9 | -1.9 | % | $ | 256.2 | $ | 264.2 | -3.0 | % | |||||||||
Title insurance | 10.9 | 10.2 | 6.6 | 32.5 | 31.4 | 3.5 | |||||||||||||||
Corporate and other | 13.8 | 6.8 | 103.5 | 26.1 | 21.8 | 19.5 | |||||||||||||||
Subtotal | 109.0 | 102.9 | 5.9 | 314.8 | 317.5 | -0.8 | |||||||||||||||
RFIG run-off business | 2.6 | 3.4 | -24.6 | 8.7 | 11.8 | -25.9 | |||||||||||||||
Consolidated | $ | 111.6 | $ | 106.4 | 4.9 | % | $ | 323.6 | $ | 329.3 | -1.7 | % | |||||||||
E. Interest and other charges (credits): | |||||||||||||||||||||
General insurance | $ | 16.1 | $ | 14.8 | $ | 48.2 | $ | 48.7 | |||||||||||||
Title insurance | 0.4 | 0.3 | 1.9 | 1.8 | |||||||||||||||||
Corporate and other (a) | 0.2 | (5.7) | (10.5) | (18.7) | |||||||||||||||||
Subtotal | 16.8 | 9.5 | 39.7 | 31.8 | |||||||||||||||||
RFIG run-off business | — | — | — | — | |||||||||||||||||
Consolidated | $ | 16.8 | $ | 9.5 | 77.8 | % | $ | 39.7 | $ | 31.8 | 24.6 | % | |||||||||
F. Segmented and consolidated pretax income (loss) excluding investment gains (losses)(B+D-E): | |||||||||||||||||||||
General insurance | $ | 145.8 | $ | 109.7 | 32.8 | % | $ | 410.0 | $ | 305.1 | 34.4 | % | |||||||||
Title insurance | 135.7 | 103.1 | 31.7 | 378.3 | 211.9 | 78.6 | |||||||||||||||
Corporate and other | 8.6 | 8.7 | -1.3 | 19.5 | 27.8 | -30.0 | |||||||||||||||
Subtotal | 290.2 | 221.6 | 30.9 | 807.9 | 544.8 | 48.3 | |||||||||||||||
RFIG run-off business | 8.4 | 4.5 | 83.9 | 20.9 | 8.0 | 160.7 | |||||||||||||||
Consolidated | 298.6 | 226.2 | 32.0 | % | 828.8 | 552.8 | 49.9 | % | |||||||||||||
Income taxes (credits) on above (b) | 58.2 | 43.9 | 161.1 | 105.9 | |||||||||||||||||
G. Net income (loss) excluding | |||||||||||||||||||||
investment gains (losses) | 240.4 | 182.3 | 31.9 | % | 667.6 | 446.9 | 49.4 | % | |||||||||||||
H. Consolidated pretax investment gains (losses): | |||||||||||||||||||||
Realized from actual transactions | 6.6 | 1.4 | 15.6 | 12.7 | |||||||||||||||||
Unrealized from changes in | |||||||||||||||||||||
fair value of equity securities | (199.3) | 79.2 | 288.1 | (529.4) | |||||||||||||||||
Total | (192.6) | 80.7 | 303.7 | (516.7) | |||||||||||||||||
Income taxes (credits) on above | (40.9) | 16.9 | 64.0 | (108.7) | |||||||||||||||||
Net of tax investment gains (losses) | (151.6) | 63.7 | 239.6 | (408.0) | |||||||||||||||||
I. Net income (loss) | $ | 88.7 | $ | 246.0 | $ | 907.3 | $ | 38.9 | |||||||||||||
J. Consolidated operating cash flow | $ | 455.1 | $ | 370.6 | $ | 970.6 | $ | 808.9 | |||||||||||||
(a) Includes consolidation/elimination entries. (b) The effective tax rates applicable to pretax income excluding investment gains and (losses) were | |||||||||||||||||||||
General Insurance Segment Results | |||||||||||||||||||||
General Insurance Summary Operating Results | |||||||||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||
Net premiums written | $ | 972.8 | $ | 932.5 | 4.3 | % | $ | 2,742.3 | $ | 2,586.0 | 6.0 | % | |||||||||
Net premiums earned | 902.8 | 861.9 | 4.7 | 2,629.2 | 2,532.8 | 3.8 | |||||||||||||||
Net investment income | 84.2 | 85.9 | -1.9 | 256.2 | 264.2 | -3.0 | |||||||||||||||
Other income | 37.5 | 31.4 | 19.3 | 111.2 | 97.8 | 13.6 | |||||||||||||||
Operating revenues | 1,024.6 | 979.3 | 4.6 | 2,996.7 | 2,895.0 | 3.5 | |||||||||||||||
Claim costs | 585.4 | 607.5 | -3.6 | 1,743.4 | 1,790.4 | -2.6 | |||||||||||||||
Sales and general expenses | 277.1 | 247.2 | 12.1 | 794.9 | 750.7 | 5.9 | |||||||||||||||
Interest and other charges | 16.1 | 14.8 | 8.9 | 48.2 | 48.7 | -1.0 | |||||||||||||||
Operating expenses | 878.8 | 869.5 | 1.1 | 2,586.6 | 2,589.9 | -0.1 | |||||||||||||||
Segment pretax operating income (loss) | $ | 145.8 | $ | 109.7 | 32.8 | % | $ | 410.0 | $ | 305.1 | 34.4 | % | |||||||||
Claim ratio | 64.8 | % | 70.5 | % | 66.3 | % | 70.7 | % | |||||||||||||
Expense ratio | 26.5 | 25.0 | 26.0 | 25.8 | |||||||||||||||||
Combined ratio | 91.3 | % | 95.5 | % | 92.3 | % | 96.5 | % | |||||||||||||
General Insurance net premiums earned increased
The General Insurance reported claim ratio improved in both 2021 periods, influenced by favorable reserve development from prior periods and a lower current period claim provision, reflecting several years of premium rate increases and underwriting actions. The year-to-date expense ratio remained relatively consistent with the prior year, generally reflecting variability of sales and general expenses within the line of coverage mix, while the third quarter 2021 expense ratio was somewhat elevated due to fluctuating levels of operating expense accruals.
Together, these factors produced significantly greater pretax operating income for the periods reported.
The following table shows recent annual and interim periods' claim ratios and the effects of claim development trends:
Effect of Prior Periods' | ||||||||||||||
(Favorable)/ | Claim Ratio Excluding | |||||||||||||
Reported | Unfavorable Claim | Prior Periods' Claim | ||||||||||||
Claim Ratio | Reserves Development | Reserves Development | ||||||||||||
2016 | 73.0 | % | 0.3 | % | 72.7 | % | ||||||||
2017 | 71.8 | 0.7 | 71.1 | |||||||||||
2018 | 72.2 | — | 72.2 | |||||||||||
2019 | 71.8 | 0.4 | 71.4 | |||||||||||
2020 | 69.9 | % | (0.8) | % | 70.7 | % | ||||||||
3rd Quarter 2020 | 70.5 | % | (0.8) | % | 71.3 | % | ||||||||
3rd Quarter 2021 | 64.8 | % | (3.2) | % | 68.0 | % | ||||||||
1st Nine Months 2020 | 70.7 | % | (0.5) | % | 71.2 | % | ||||||||
1st Nine Months 2021 | 66.3 | % | (2.9) | % | 69.2 | % | ||||||||
Quarterly and annual claim ratios and trends may not be particularly meaningful indicators of future outcomes for a liability-oriented mix of business with relatively long claim payment patterns. Assuming the current line of coverage mix, management's targets are claim ratio averages in the high
Title Insurance Segment Results | |||||||||||||||||||||
Title Insurance Summary Operating Results | |||||||||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||
Net premiums and fees earned (a) | $ | 1,142.1 | $ | 857.0 | 33.3 | % | $ | 3,218.7 | $ | 2,254.5 | 42.8 | % | |||||||||
Net investment income | 10.9 | 10.2 | 6.6 | 32.5 | 31.4 | 3.5 | |||||||||||||||
Other income | 0.3 | 0.3 | 1.1 | 0.8 | 0.6 | 22.6 | |||||||||||||||
Operating revenues | 1,153.3 | 867.6 | 32.9 | 3,252.0 | 2,286.6 | 42.2 | |||||||||||||||
Claim costs | 32.9 | 21.7 | 51.3 | 95.4 | 61.1 | 56.1 | |||||||||||||||
Sales and general expenses (a) | 984.1 | 742.3 | 32.6 | 2,776.3 | 2,011.8 | 38.0 | |||||||||||||||
Interest and other charges | 0.4 | 0.3 | 29.3 | 1.9 | 1.8 | 7.8 | |||||||||||||||
Operating expenses | 1,017.6 | 764.5 | 33.1 | 2,873.7 | 2,074.7 | 38.5 | |||||||||||||||
Segment pretax operating income (loss) | $ | 135.7 | $ | 103.1 | 31.7 | % | $ | 378.3 | $ | 211.9 | 78.6 | % | |||||||||
Claim ratio | 2.9 | % | 2.5 | % | 3.0 | % | 2.7 | % | |||||||||||||
Expense ratio | 86.1 | 86.6 | 86.2 | 89.2 | |||||||||||||||||
Combined ratio | 89.0 | % | 89.1 | % | 89.2 | % | 91.9 | % | |||||||||||||
(a) | Certain reclassification adjustments were made to increase net premiums and fees earned with a corresponding increase to sales and general expenses of |
Title Insurance net premiums and fees earned increased by
The Title Insurance reported claim ratio was higher for the quarter and year-to-date periods, influenced somewhat by less favorable reserve development from prior periods. The expense ratio improved over the prior year's third quarter and first nine months from greater leverage of the expense structure on significantly higher premium and fee volume.
Together, these factors produced significantly greater pretax operating income for the periods reported.
The following table shows recent annual and interim periods' claim ratios and the effects of claim development trends:
Effect of Prior Periods' | ||||||||||||||
(Favorable)/ | Claim Ratio Excluding | |||||||||||||
Reported | Unfavorable Claim | Prior Periods' Claim | ||||||||||||
Claim Ratio | Reserves Development | Reserves Development | ||||||||||||
2016 | 3.5 | % | (1.0) | % | 4.5 | % | ||||||||
2017 | 0.8 | (3.0) | 3.8 | |||||||||||
2018 | 1.9 | (1.8) | 3.7 | |||||||||||
2019 | 2.5 | (1.2) | 3.7 | |||||||||||
2020 | 2.3 | % | (1.3) | % | 3.6 | % | ||||||||
3rd Quarter 2020 | 2.5 | % | (1.0) | % | 3.5 | % | ||||||||
3rd Quarter 2021 | 2.9 | % | (0.8) | % | 3.7 | % | ||||||||
1st Nine Months 2020 | 2.7 | % | (0.8) | % | 3.5 | % | ||||||||
1st Nine Months 2021 | 3.0 | % | (0.7) | % | 3.7 | % | ||||||||
RFIG Run-off Segment Results | |||||||||||||||||||||
RFIG Run-off Summary Operating Results | |||||||||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||
Mortgage Insurance (MI) | |||||||||||||||||||||
Net premiums earned | $ | 7.7 | $ | 10.8 | -28.8 | % | $ | 25.4 | $ | 35.1 | -27.5 | % | |||||||||
Net investment income | 2.6 | 3.4 | -24.6 | 8.7 | 11.8 | -25.9 | |||||||||||||||
Claim costs | (1.1) | 6.7 | -116.5 | 3.4 | 28.4 | -87.7 | |||||||||||||||
MI pretax operating income (loss) | $ | 8.4 | $ | 4.5 | 83.9 | % | $ | 20.9 | $ | 8.0 | 160.7 | % | |||||||||
Claim ratio | -14.5 | % | 62.4 | % | 13.7 | % | 80.8 | % | |||||||||||||
Expense ratio | 39.0 | 27.2 | 38.5 | 29.9 | |||||||||||||||||
Combined ratio | 24.5 | % | 89.6 | % | 52.2 | % | 110.7 | % | |||||||||||||
Pretax operating results of RFIG Run-off reflect the continuing drop in net earned premiums in line with the declining risk in force and significantly lower claim costs in comparison to 2020 periods. Net investment income decreased in both 2021 periods from a declining invested asset base and lower investment yields. Claim costs reflect fewer newly reported delinquencies along with improving trends in cure rates and claim severity influenced by the ongoing economic recovery and continued strength in the real estate market.
Together, these factors produced significantly greater pretax operating income for the periods reported.
The following table shows recent annual and interim periods' claim ratios and the effects of claim development trends:
Effect of Prior Periods' | ||||||||||||||
(Favorable)/ | Claim Ratio Excluding | |||||||||||||
Reported | Unfavorable Claim | Prior Periods' Claim | ||||||||||||
Claim Ratio | Reserves Development | Reserves Development | ||||||||||||
2016 | 34.1 | % | (39.8) | % | 73.9 | % | ||||||||
2017 | 57.6 | (38.3) | 95.9 | |||||||||||
2018 | 43.2 | (27.0) | 70.2 | |||||||||||
2019 | 55.0 | (12.5) | 67.5 | |||||||||||
2020 | 81.7 | % | (26.5) | % | 108.2 | % | ||||||||
3rd Quarter 2020 | 62.4 | % | (77.8) | % | 140.2 | % | ||||||||
3rd Quarter 2021 | (14.5) | % | (106.3) | % | 91.8 | % | ||||||||
1st Nine Months 2020 | 80.8 | % | (22.3) | % | 103.1 | % | ||||||||
1st Nine Months 2021 | 13.7 | % | (47.7) | % | 61.4 | % | ||||||||
Corporate and Other Operating Results | ||||||||||||||||||||||
Corporate and Other Summary Operating Results | ||||||||||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||||||||
Net life and accident premiums earned | $ | 2.6 | $ | 2.9 | -9.0 | % | $ | 8.2 | $ | 9.0 | -9.2 | % | ||||||||||
Net investment income | 13.8 | 6.8 | 103.5 | 26.1 | 21.8 | 19.5 | ||||||||||||||||
Other operating income | — | — | — | — | — | — | ||||||||||||||||
Operating revenues | 16.5 | 9.7 | 69.9 | 34.3 | 30.8 | 11.2 | ||||||||||||||||
Claim costs | 1.1 | 2.0 | -45.4 | 4.5 | 4.9 | -8.0 | ||||||||||||||||
Insurance expenses | 0.8 | 0.9 | -16.5 | 2.6 | 3.3 | -19.7 | ||||||||||||||||
Corporate, interest and other expenses - net | 5.9 | (2.0) | N/M | 7.5 | (5.2) | 243.1 | ||||||||||||||||
Operating expenses | 7.8 | 0.9 | N/M | 14.8 | 3.0 | N/M | ||||||||||||||||
Corporate and other pretax operating income (loss) | $ | 8.6 | $ | 8.7 | -1.3 | % | $ | 19.5 | $ | 27.8 | -30.0 | % | ||||||||||
This segment includes the combination of a small life and accident insurance business and the net costs associated with the parent holding company and its internal corporate services subsidiaries. The segment tends to produce highly variable results stemming from volatility inherent from the lack of scale. Interest expense increased related to the issuance of
Summary Consolidated Balance Sheet | |||||||||||
September 30, | December 31, | September 30, | |||||||||
2021 | 2020 | 2020 | |||||||||
Assets: | |||||||||||
Cash and fixed maturity securities | $ | 11,721.9 | $ | 11,365.1 | $ | 11,049.8 | |||||
Equity securities | 4,828.0 | 4,054.8 | 3,682.9 | ||||||||
Other invested assets | 116.7 | 115.3 | 113.3 | ||||||||
Cash and invested assets | 16,666.7 | 15,535.3 | 14,846.0 | ||||||||
Accounts and premiums receivable | 1,861.4 | 1,593.9 | 1,734.0 | ||||||||
Reinsurance balances recoverable | 5,054.7 | 4,362.8 | 4,359.8 | ||||||||
Deferred policy acquisition costs | 355.3 | 328.0 | 328.8 | ||||||||
Sundry assets | 1,051.6 | 995.0 | 979.9 | ||||||||
Total assets | $ | 24,989.9 | $ | 22,815.2 | $ | 22,248.7 | |||||
Liabilities and Shareholders' Equity: | |||||||||||
Policy liabilities | $ | 2,884.7 | $ | 2,593.1 | $ | 2,689.9 | |||||
Claim reserves | 11,433.7 | 10,671.0 | 10,557.1 | ||||||||
Federal income tax payable: Current | 1.2 | 4.2 | 9.4 | ||||||||
Deferred | 151.5 | 137.3 | 66.4 | ||||||||
Reinsurance balances and funds | 942.4 | 725.4 | 852.1 | ||||||||
Debt | 1,588.2 | 966.4 | 966.2 | ||||||||
Sundry liabilities | 1,658.4 | 1,530.8 | 1,032.8 | ||||||||
Total liabilities | 18,660.5 | 16,628.5 | 16,174.0 | ||||||||
Shareholders' equity | 6,329.4 | 6,186.6 | 6,074.6 | ||||||||
Total liabilities and shareholders' equity | $ | 24,989.9 | $ | 22,815.2 | $ | 22,248.7 | |||||
Cash, Invested Assets, and Shareholders' Equity | ||||||||||||||||||||
Cash, Invested Assets, and Shareholders' Equity | ||||||||||||||||||||
% Change | ||||||||||||||||||||
Sept. 30, | Dec. 31, | Sept. 30, | Sept. '21/ | Sept. '21/ | ||||||||||||||||
2021 | 2020 | 2020 | Dec. '20 | Sept. '20 | ||||||||||||||||
Cash and invested assets: | ||||||||||||||||||||
Fixed maturity securities, cash and other invested | $ | 11,838.6 | $ | 11,480.4 | $ | 11,163.1 | 3.1 | % | 6.1 | % | ||||||||||
Equity securities | 4,828.0 | 4,054.8 | 3,682.9 | 19.1 | 31.1 | |||||||||||||||
Total per balance sheet | $ | 16,666.7 | $ | 15,535.3 | $ | 14,846.0 | 7.3 | % | 12.3 | % | ||||||||||
Total at cost for all | $ | 15,244.2 | $ | 14,151.6 | $ | 13,849.1 | 7.7 | % | 10.1 | % | ||||||||||
Composition of shareholders' equity per share: | ||||||||||||||||||||
Equity before items below | $ | 17.85 | $ | 17.73 | $ | 18.17 | 0.7 | % | -1.8 | % | ||||||||||
Unrealized investment gains (losses) and other | ||||||||||||||||||||
accumulated comprehensive income (loss) | 3.11 | 3.02 | 2.22 | |||||||||||||||||
Total | $ | 20.96 | $ | 20.75 | $ | 20.39 | 1.0 | % | 2.8 | % | ||||||||||
Segmented composition of | ||||||||||||||||||||
shareholders' equity per share: | ||||||||||||||||||||
Excluding RFIG run-off segment | $ | 19.65 | $ | 19.25 | $ | 18.93 | 2.1 | % | 3.8 | % | ||||||||||
RFIG run-off segment | 1.31 | 1.50 | 1.46 | |||||||||||||||||
Consolidated total | $ | 20.96 | $ | 20.75 | $ | 20.39 | 1.0 | % | 2.8 | % | ||||||||||
Old Republic's invested assets portfolio is directed 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 customers, policyholders and their beneficiaries, as well as the long-term stability of the subsidiaries' capital accounts. For these reasons, 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 and hedge fund 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 September 30, 2021, the consolidated investment portfolio reflected an allocation of approximately
In recent years, a significant portion of our investable funds have been directed toward high-quality common stocks of U.S. companies (currently limited to fewer than 100 issues). We favor those with long-term records of reasonable earnings growth and steadily increasing dividends. Pursuant to enterprise risk management guidelines and controls, we perform regular stress tests of the equities portfolio to gain reasonable assurance that periodic downdrafts in market prices would not seriously undermine our financial strength and the long-term continuity and prospects of our insurance underwriting business.
Changes in shareholders' equity per share are reflected in the following table. As shown, these resulted mostly from net income excluding net investment gains (losses), realized and unrealized investment gains or losses, and dividend payments to shareholders.
Shareholders' Equity Per Share | |||||||||||||||
Quarter | Year | ||||||||||||||
Ended | Nine Months Ended | Ended | |||||||||||||
Sept. 30, | September 30, | Dec. 31, | |||||||||||||
2021 | 2021 | 2020 | 2020 | ||||||||||||
Beginning balance | $ | 22.59 | $ | 20.75 | $ | 19.98 | $ | 19.98 | |||||||
Changes in shareholders' equity: | |||||||||||||||
Net income (loss) excluding net investment gains (losses) | 0.79 | 2.22 | 1.50 | 2.24 | |||||||||||
Net of tax realized investment gains (losses) | 0.02 | 0.04 | 0.03 | 0.04 | |||||||||||
Net of tax unrealized investment gains (losses) | (0.70) | 0.09 | (0.53) | 0.50 | |||||||||||
Total net of tax realized and unrealized | |||||||||||||||
investment gains (losses) | (0.68) | 0.13 | (0.50) | 0.54 | |||||||||||
Cash dividends | (1.72) | (2.16) | (0.63) | (1.84) | |||||||||||
Other | (0.02) | 0.02 | 0.04 | (0.17) | |||||||||||
Net change | (1.63) | 0.21 | 0.41 | 0.77 | |||||||||||
Ending balance | $ | 20.96 | $ | 20.96 | $ | 20.39 | $ | 20.75 | |||||||
Percentage change for the period | -7.2 | % | 1.0 | % | 2.1 | % | 3.9 | % | |||||||
Capitalization | |||||||||||
Capitalization | |||||||||||
September 30, | December 31, | September 30, | |||||||||
2021 | 2020 | 2020 | |||||||||
Debt: | |||||||||||
$ | 398.3 | $ | 397.9 | $ | 397.7 | ||||||
547.2 | 546.8 | 546.7 | |||||||||
642.6 | — | — | |||||||||
Other miscellaneous debt | — | 21.7 | 21.7 | ||||||||
Total debt | 1,588.2 | 966.4 | 966.2 | ||||||||
Common shareholders' equity | 6,329.4 | 6,186.6 | 6,074.6 | ||||||||
Total capitalization | $ | 7,917.6 | $ | 7,153.1 | $ | 7,040.8 | |||||
Capitalization ratios: | |||||||||||
Debt | 20.1 | % | 13.5 | % | 13.7 | % | |||||
Common shareholders' equity | 79.9 | 86.5 | 86.3 | ||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | |||||
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, often many years after issuance and expiration of a policy. This basic fact 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 the maintenance of financial soundness in support of the insurance subsidiaries' long-term obligations to policyholders and their beneficiaries.
In this light, the Company's affairs are managed for the long run and without significant regard to 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 and Other Information:
- About Old Republic
- Conference Call Information
- Safe Harbor Statement
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 operations are the third largest in its industry.
The nature of Old Republic's business requires that it be managed for the long run. Its consistent and reliable cash dividend policy reflects this long-term orientation. The current annualized dividend rate of
ORI | Selected Indices' Compounded | ||||
Annual | Annual | Total Annual Returns | |||
Book Value | Market Value | Nominal | S & P | ||
Compounded | Compounded | Gross | S & P | P&C | |
Total | Total | Domestic | 500 | Insurance | |
Return | Return | Product | Index | Index | |
Ten Years 2001 - 2010 | |||||
Ten Years 2011 - 2020 | |||||
Twenty Years 2001 - 2020 | |||||
First Nine Months 2020 - only | - | - | - | ||
First Nine Months 2021 - only | |||||
*Estimated | |||||
According to the most recent edition of Mergent's Dividend Achievers, Old Republic is listed in 58th place among just 111 qualifying publicly held 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 third quarter and first nine months of 2021 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 1-888-655-9638. Interested parties may also listen to a replay of the call through November 4, 2021 by dialing 1-800-770-2030, passcode 8437240, or by accessing it on Old Republic International's website through November 28, 2021.
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. It is possible that Old Republic's operating results, business and financial condition could be adversely affected in subsequent periods by future economic disruptions caused by the COVID-19 pandemic and the associated governmental responses.
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 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.
The General Insurance, Title Insurance, Corporate and Other Segments, and the RFIG Run-off business 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.
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 2020 Form 10-K Annual Report filing to the Securities and Exchange Commission, which is 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 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 | ||
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SOURCE Old Republic International Corporation
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