Old Republic International: A Dividend Champion Navigating Insurance Market Challenges

Company Overview - Old Republic International (NYSE: ORI) is a prominent member of the "Dividend Insurance Champion" club, recognized as the third-largest title insurer in the U.S. and also providing commercial insurance coverages [1][4] - The company has a strong market position, holding a 15.2% share in the title insurance market, following Fidelity National and First American [5][4] Financial Performance - In Q2 2024, Old Republic reported a post-tax income of $91.8 million, a year-over-year decrease of 41%, while year-to-date post-tax income increased from $355.4 million to $408.6 million [3][2] - The underwriting profit for the insurance segment in the first half of 2024 was $16.9 million, with a combined ratio of 98.6% and premium volume of approximately $1.2 billion [7][9] - The commercial insurance segment experienced double-digit growth (approximately 15%) despite a lower underwriting margin compared to the previous year [17][10] Market Dynamics - The title insurance market is primarily controlled by independent title agents, leading to high commission rates and an expense ratio around 90% [6] - The insurance portfolio is heavily weighted towards commercial auto and workers' compensation coverages, which together accounted for 60% of FY2023 earned premiums [11][12] Dividend and Shareholder Returns - Old Republic has a long-standing history of paying uninterrupted cash dividends since 1942, with a record of increasing annual cash dividends for the past 43 years [19][21] - In Q2 2024, the company returned approximately $479 million to shareholders, including $69 million in dividends and $410 million in share repurchases [21][22] Debt and Valuation - As of the first half of 2024, the company's mark-to-market debt was nearly $2.0 billion, reflecting a $500 million increase from December 2023 [23] - The intrinsic value of Old Republic is estimated to be between $25.90 and $28 per share, based on a book value per share of $23.59 and projected FY2024 earnings of around $0.8 billion [27][26] Strategic Outlook - The company is focused on driving growth and profitability in the general insurance business while being aware of potential headwinds in the real estate sector that may impact profitability [28][10] - Management aims to maintain steady underwriting performance to support gradual dividend increases and book value growth [28][2]