Old Republic International (US:ORI)2022-10-27 21:10Financial Data and Key Metrics Changes - Consolidated net premiums and fees earned were just below $2 billion for the quarter and just below $6 billion year-to-date [8] - Consolidated pretax operating income was $258 million for the quarter and stands at $758 million year-to-date [8] - Consolidated combined ratio came in at a healthy 91.4% for both the quarter and year-to-date periods [9] - Net income, excluding investment gains and losses, was $206 million compared to $240 million last year, with a per share basis of $0.68 versus $0.79 [12] - Book value per share ended the quarter at just under $19, a decrease of 9.4% from the prior year-end [13] Business Line Data and Key Metrics Changes - General Insurance net premiums earned increased by over 7% for both the quarter and year-to-date periods [9] - Title Insurance net premiums and fees earned decreased by 15% in the third quarter and 7% year-to-date [9] - General Insurance pretax operating income rose by 15% to $168 million, with a loss ratio of 63% compared to 65% in the previous year [23] - Title Insurance reported premium and fee revenue for the quarter of $968 million, down 15% from the prior year [32] Market Data and Key Metrics Changes - The mortgage interest rate environment has negatively impacted Title Insurance, leading to a steep decline in refinance activity [33] - Commercial activity in Title Insurance remained strong, with commercial premiums up 29% over the third quarter of 2021 [33] Company Strategy and Development Direction - The company emphasizes a long-standing diversification strategy that provides steadier earnings and shareholder returns [10] - The Title Insurance segment is focusing on technology and digital business plans to improve productivity and customer engagement [35][38] - The company is committed to maintaining a strong balance sheet and returning capital to shareholders, having paid $375 million in dividends and repurchased $225 million worth of shares [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds in the real estate markets and interest rate environment but indicated these were expected and planned for [67] - The General Insurance group is experiencing favorable trends in loss ratios, combined ratios, and income, which are expected to continue [68] Other Important Information - The company has reduced its exposure to equities by nearly $2 billion since the beginning of the year, reinvesting in fixed income securities [8] - The investment portfolio currently stands at about 80% in bonds and short-term investments, and 20% in stocks [15] Q&A Session Summary Question: What is driving the uptick in the general liability loss ratio? - Management noted that the loss ratio is volatile due to the smaller scale of the coverage line, and no specific issues were identified [44] Question: Can you provide an update on the Pavaso platform? - Pavaso is a customer-facing platform used by lenders to improve the closing experience, and it is ready for use by agents [46] Question: What is the outlook for the expense ratio in General Insurance? - Management indicated that a portion of the increase in the expense ratio is due to changes in the line of business mix, and they will monitor this closely [52] Question: What are the trends in paid loss ratios and reserve development? - Management stated that both paid loss ratios and overall loss ratios are trending down, reflecting improvements in pricing and underwriting [56] Question: What is the expected mix of equities versus bonds in the investment portfolio? - Management is comfortable with the current 80-20 mix of fixed income and equities and will continue to evaluate yields [60]