Old Republic International (ORI) - 2025 Q1 - Quarterly Results

OVERALL RESULTS Summary of First Quarter 2025 Performance Q1 2025 net income decreased due to lower investment gains, while net operating income and diluted per share significantly increased, driven by strong operational performance and substantial growth in consolidated net premiums and fees earned | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------------------- | :----------------- | :----------------- | :------- | | Net income | $245.0 | $316.7 | -22.7% | | Net of tax investment gains | $43.2 | $132.0 | -67.3% | | Net income excluding investment gains | $201.7 | $184.7 | 9.2% | | Consolidated net premiums and fees earned | >$1,800.0 | $1,642.7 | 12.1% | | Net investment income | $170.7 | $164.1 | 4.0% | | Consolidated combined ratio | 93.7% | 94.3% | -0.6 pts | | Favorable loss reserve development | 2.6 pts | 2.3 pts | +0.3 pts | | Total capital returned to shareholders | $93.0 | N/A | N/A | | Metric | Q1 2025 | Q1 2024 | % Change | | :-------------------------------- | :------ | :------ | :------- | | Net income per diluted share | $0.98 | $1.15 | -14.8% | | Net of tax investment gains per diluted share | $0.17 | $0.48 | -64.6% | | Net income excluding investment gains per diluted share | $0.81 | $0.67 | 20.9% | | Book value per common share (Mar 31) | $24.19 | $22.84 | 5.9% | | Book value per common share (Dec 31) | N/A | $22.84 | N/A | - Book value per share of $24.19, which inclusive of dividends declared was up 7.2% since year-end 2024[3] MANAGEMENT'S PERSPECTIVE ON FINANCIAL REPORTING Focus on Operating Income Management emphasizes evaluating results by excluding investment gains (losses) to focus on operating income, providing clearer analysis of insurance operations as investment realizations can be discretionary and distort trends - Management's key objectives are to achieve highly profitable operating results over the long term and ensure balance sheet strength for insurance underwriting subsidiaries' obligations[4] - The evaluation of periodic and long-term results excludes consideration of all investment gains (losses) to better analyze and establish accountability for insurance operations[4][5] - The inclusion of realized and unrealized investment gains (losses) in net income can mask trends in operating results due to their discretionary nature and significant period-to-period fluctuations[5] FINANCIAL HIGHLIGHTS Summary Income Statements Total operating revenues increased by 11.4% in Q1 2025, driven by growth in net premiums, fees, and investment income, though total net investment gains significantly decreased, leading to lower total net income compared to the prior year | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------------------------- | :----------------- | :----------------- | :------- | | Net premiums and fees earned | $1,841.0 | $1,642.7 | 12.1% | | Net investment income | $170.7 | $164.1 | 4.0% | | Other income | $47.2 | $41.9 | 12.6% | | Total operating revenues | $2,059.0 | $1,848.8 | 11.4% | | Total net investment gains | $55.0 | $167.1 | -67.1% | | Total revenues | $2,114.0 | $2,015.9 | 4.9% | | Total expenses | $1,806.3 | $1,617.2 | 11.7% | | Pretax income | $307.7 | $398.7 | -22.8% | | Total net income | $246.1 | $316.7 | -22.3% | | Net income to shareholders | $245.0 | $316.7 | -22.7% | Common Stock Statistics Diluted net income per share, excluding investment gains, increased by 20.9% in Q1 2025, while total diluted net income per share decreased due to a significant reduction in net investment gains | Metric | Q1 2025 | Q1 2024 | % Change | | :------------------------------------------------- | :------ | :------ | :------- | | Basic net income excluding investment gains (losses) | $0.83 | $0.68 | 22.1% | | Basic net income | $1.01 | $1.17 | -13.7% | | Diluted net income excluding investment gains (losses) | $0.81 | $0.67 | 20.9% | | Diluted net income | $0.98 | $1.15 | -14.8% | | Cash dividends declared on common stock | $0.290 | $0.265 | 9.4% | SOURCES OF CONSOLIDATED INCOME BY SEGMENT Consolidated Income Overview Consolidated net premiums and fees earned increased by 12.1%, driven by strong growth in Specialty and Title Insurance, with underwriting income up 19.0% and an improved consolidated combined ratio of 93.7% | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------------------------- | :----------------- | :----------------- | :------- | | Net premiums and fees earned: | | | | | Specialty Insurance | $1,233.6 | $1,091.6 | 13.0% | | Title Insurance | $605.1 | $545.4 | 10.9% | | Corporate & Other | $2.2 | $5.5 | -58.8% | | Consolidated | $1,841.0 | $1,642.7 | 12.1% | | Underwriting income (loss): | | | | | Specialty Insurance | $126.1 | $105.8 | 19.2% | | Title Insurance | ($12.2) | ($13.5) | 9.4% | | Corporate & Other | ($14.0) | ($8.4) | -66.9% | | Consolidated | $99.8 | $83.8 | 19.0% | | Consolidated combined ratio: | | | | | Loss ratio (Total) | 42.2% | 42.5% | -0.3 pts | | Expense ratio | 51.5% | 51.8% | -0.3 pts | | Combined ratio | 93.7% | 94.3% | -0.6 pts | | Net investment income: | | | | | Specialty Insurance | $150.0 | $131.1 | 14.4% | | Title Insurance | $16.7 | $15.7 | 6.6% | | Corporate & Other | $3.9 | $17.3 | -77.3% | | Consolidated | $170.7 | $164.1 | 4.0% | | Pretax income excluding investment gains (losses): | | | | | Specialty Insurance | $260.1 | $220.4 | 18.0% | | Title Insurance | $4.3 | $2.3 | 84.4% | | Corporate & Other | ($11.8) | $8.8 | N/M | | Consolidated | $252.7 | $231.5 | 9.1% | - Net income excluding investment gains (losses) increased by 9.8% to $202.8 million[8] Specialty Insurance Segment Operating Results The Specialty Insurance segment demonstrated strong Q1 2025 performance, with net premiums earned increasing by 13.0% and pretax operating income rising by 18.0%, driven by premium rate increases and new business, resulting in an improved combined ratio of 89.8% | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------------------------- | :----------------- | :----------------- | :------- | | Net premiums written | $1,272.0 | $1,157.1 | 9.9% | | Net premiums earned | $1,233.6 | $1,091.6 | 13.0% | | Net investment income | $150.0 | $131.1 | 14.4% | | Operating revenues | $1,430.7 | $1,264.5 | 13.1% | | Segment pretax operating income | $260.1 | $220.4 | 18.0% | | Combined ratio | 89.8% | 90.3% | -0.5 pts | | Loss ratio (Total) | 61.7% | 62.7% | -1.0 pts | | Expense ratio | 28.1% | 27.6% | +0.5 pts | - Premium growth was most pronounced within commercial auto, property, and general liability, with strong rate increases in these lines[10] - Net investment income increase was primarily driven by higher investment yields and a higher invested asset base[11] - The 2025 loss ratio reflects higher levels of favorable prior year loss reserve development, mainly from workers' compensation, commercial auto, and property coverages[12] Title Insurance Segment Operating Results The Title Insurance segment experienced a 10.9% increase in net premiums and fees earned in Q1 2025, with significant growth in commercial and residential premiums, leading to an 84.4% surge in pretax operating income and an improved expense ratio despite a higher loss ratio | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------------------------- | :----------------- | :----------------- | :------- | | Net premiums and fees earned | $605.1 | $545.4 | 10.9% | | Net investment income | $16.7 | $15.7 | 6.6% | | Operating revenues | $622.0 | $561.3 | 10.8% | | Segment pretax operating income | $4.3 | $2.3 | 84.4% | | Combined ratio | 102.1% | 102.5% | -0.4 pts | | Loss ratio (Total) | 2.7% | 2.2% | +0.5 pts | | Expense ratio | 99.4% | 100.3% | -0.9 pts | - Growth in agency produced revenues was 12% and directly produced revenues was 6%, with commercial premiums representing nearly 24% of net premiums earned, up from 21% last year[14] - The Title Insurance loss ratio increased primarily due to a lower level of favorable prior year loss reserve development compared to 2024[15] Corporate & Other Operating Results The Corporate & Other segment reported an $11.8 million pretax operating loss in Q1 2025, a significant decline from the prior year, primarily due to decreased net premiums earned and net investment income, increased operating expenses, and the segment's inherent variability | Metric | Q1 2025 (Millions) | Q1 2024 (Millions) | % Change | | :-------------------------------------- | :----------------- | :----------------- | :------- | | Net premiums earned | $2.2 | $5.5 | -58.8% | | Net investment income | $3.9 | $17.3 | -77.3% | | Operating revenues | $6.2 | $22.9 | -72.9% | | Operating expenses | $18.0 | $14.0 | 27.9% | | Corporate & Other pretax operating income (loss) | ($11.8) | $8.8 | N/M | - Net investment income was significantly impacted by a lower invested asset base due to capital returns to shareholders (including a special cash dividend) and the sale of the RFIG Run-off business[18] - The increase in corporate operating expenses was driven by higher personnel costs[18] SUMMARY CONSOLIDATED BALANCE SHEET Consolidated Balance Sheet Overview As of March 31, 2025, Old Republic's total assets increased slightly to $28,028.1 million from year-end 2024, with total equity also rising due to unrealized investment gains and net income | Metric | Mar. 31, 2025 (Millions) | Dec. 31, 2024 (Millions) | | :-------------------------------------- | :----------------------- | :----------------------- | | Assets: | | | | Fixed income securities (at fair value) | $12,248.1 | $12,091.5 | | Short-term investments | $1,036.4 | $1,403.7 | | Equity securities (at fair value) | $2,592.5 | $2,540.7 | | Total assets | $28,028.1 | $27,843.1 | | Liabilities and Equity: | | | | Loss and loss adjustment expense reserves | $13,950.9 | $13,727.7 | | Unearned premiums | $3,658.6 | $3,505.4 | | Total liabilities | $22,084.5 | $22,224.1 | | Total equity | $5,943.5 | $5,618.9 | | Total liabilities and equity | $28,028.1 | $27,843.1 | | Metric | Mar. 31, 2025 | Dec. 31, 2024 | | :------------------------------------------------- | :------------ | :------------ | | Composition of shareholders' equity per share: | | | | Equity before items below | $20.46 | $19.65 | | Unrealized investment gains (losses) and other accumulated comprehensive income (loss) | $3.73 | $3.19 | | Total | $24.19 | $22.84 | INVESTMENTS Investment Portfolio and Strategy Old Republic's consolidated investment portfolio is primarily allocated to fixed income (84%) and equity securities (16%), focusing on quality investments for consistent income and long-term capital stability, with limited exposure to high-risk assets and regular stress tests - Investment portfolio allocation: approximately 84% to fixed income securities and short-term investments, and 16% to equity securities[20] - Investment management focuses on retaining quality investments for consistent income streams and monitoring concentration limits[20] - The company has extremely limited exposure to high-risk or illiquid asset classes (e.g., limited partnerships, derivatives, hedge funds, private equity) and does not engage in hedging or securities lending[21] - Regular stress tests are performed on the investment portfolio to ensure financial strength against market downdrafts[21] SHAREHOLDERS' EQUITY Shareholders' Equity Per Share Analysis Shareholders' equity per share increased by 5.9% for the quarter, or 7.2% inclusive of cash dividends, driven by net income (excluding investment gains) and positive net of tax realized and unrealized investment gains, partially offset by cash dividends | Metric | Q1 2025 | Q1 2024 | | :------------------------------------------------- | :------ | :------ | | Beginning balance | $22.84 | $23.31 | | Net income excluding net investment gains | $0.83 | $0.68 | | Net of tax realized investment gains | $0.12 | $0.53 | | Net of tax unrealized investment gains (losses): | | | | Fixed income securities | $0.46 | ($0.25) | | Equity securities | $0.06 | ($0.04) | | Total net of tax realized and unrealized investment gains | $0.64 | $0.24 | | Cash dividends declared | ($0.290) | ($0.265) | | Net change | $1.35 | $0.52 | | Ending balance | $24.19 | $23.83 | | Change for the period | 5.9% | 2.2% | | Change for the period, inclusive of cash dividends declared | 7.2% | 3.4% | - Total capital returned to shareholders during the quarter was $93 million, comprising $68 million in dividends and $25 million in share repurchases[23] COMPANY STRATEGY AND INFORMATION Managing Insurance Business for the Long-Run Old Republic manages its insurance business with a long-term perspective, prioritizing favorable underwriting results over cycles and maintaining a sound financial condition, with results best evaluated over 10-year intervals to account for economic and underwriting cycles and quantify loss costs with greater certainty - The insurance business is managed for the long run, with a primary focus on achieving favorable underwriting results over cycles and maintaining sound financial condition[24] - Management believes results are best evaluated over 10-year intervals to account for economic and underwriting cycles and to quantify reserved loss costs with greater certainty[25] About Old Republic Old Republic International Corporation, founded in 1923 and a Fortune 500 company, is a leading specialty insurer operating diverse property & casualty and title insurance companies across the United States and Canada, specializing in underwriting and risk management services - Old Republic is a leading specialty insurer, operating diverse property & casualty and title insurance companies[26] - Founded in 1923 and a Fortune 500 member, the company provides underwriting and risk management services in the U.S. and Canada[26] Conference Call and Investor Contacts Old Republic held a conference call on April 24, 2025, to discuss its first quarter performance, with details provided for accessing the live call, replay, and investor relations contact information for further inquiries - A conference call was scheduled for April 24, 2025, at 3:00 p.m. ET to discuss Q1 2025 performance[27] - Access to the conference call was available via Old Republic's website or by dialing 1-888-596-4144 (passcode 4060501); a replay was available through May 1, 2025[27] - Investor Relations contact: Old Republic International Corporation, 307 North Michigan Avenue, Chicago, IL 60601, (312) 346-8100[33] SAFE HARBOR STATEMENT Forward-Looking Statements and Risk Factors The report includes a safe harbor statement regarding forward-looking statements, cautioning that historical data is not indicative of future results and outlining various assumptions, uncertainties, and risks that may affect future performance across Specialty, Title, and Life and Accident insurance segments - Historical data is not necessarily indicative of future operating results due to the long-term nature of insurance, seasonal patterns, investment yields, government policies, and legal changes[29] - Forward-looking statements involve assumptions, uncertainties, and risks, including market competition, economic conditions, claim frequency/severity, reinsurance, underwriting risks, and technology breaches[30] - Specific risk factors for Specialty Insurance include market competition, economic considerations, claim development, and reinsurance; Title Insurance risks include housing demand, mortgage costs, and employment trends; Life and accident insurance earnings are affected by employment, consumer spending, mortality/health trends, and policy lapsation rates[30] - A more detailed listing of risks is available in Part I, Item 1A - Risk Factors, of the Company's 2024 Form 10-K[31]