Old Republic International (ORI) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, the company reported consolidated pre-tax operating income of $236 million, down from $285 million in Q4 2024, with a consolidated combined ratio of 96% compared to 92.7% [4] - For the full year 2025, consolidated pre-tax operating income was $1 billion, with a combined ratio of 94.7% [4] - The operating return on beginning equity was 14.1%, and book value per share increased by 22% [4][10] Business Line Data and Key Metrics Changes - Specialty insurance net premiums earned grew by 8.3% in Q4 2025 and by 10.9% for the full year, surpassing $5 billion for the first time [5] - Specialty insurance pre-tax operating income for Q4 was $178 million, down from $228 million, with a combined ratio of 97.3 compared to 91.8 [5] - Title insurance premiums and fees increased by 12.4% in Q4 2025, with pre-tax operating income rising to $65 million from $55.4 million [5][19] Market Data and Key Metrics Changes - The commercial sector showed strong activity, while the residential market faced challenges due to pricing and affordability issues [17] - Commercial premiums accounted for 29% of earned premiums in Q4 2025, up from 23% in the same quarter last year [17] Company Strategy and Development Direction - The company aims to maintain pricing discipline and underwriting excellence, focusing on profitability over top-line growth [25] - Investments in technology modernization, data analytics, and AI are expected to yield long-term benefits despite short-term expense ratio pressures [12] - The specialty portfolio is now more diversified, which positions the company to manage market cycles effectively [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving consistent performance in 2026, despite potential pricing pressures in the market [25] - The company anticipates solid growth and profitability in specialty insurance, driven by contributions from new specialty operating companies [16] Other Important Information - The company declared nearly $700 million in dividends and repurchased $56 million worth of shares, totaling over $1 billion in capital returns for the year [10] - There is $850 million remaining in the current share repurchase program, with plans to utilize it opportunistically [59] Q&A Session Summary Question: What are the combined ratio targets for 2026? - Management expects to maintain a combined ratio around 93.2 for 2026, with variations depending on the operating company [24] Question: What led to the higher loss pick in commercial auto? - Management noted that while paid claims did not reflect changes, case reserves increased, prompting a conservative approach to loss picks [26][28] Question: What is the outlook for the title business in 2026? - The title business is expected to see a 15%-20% improvement in commercial premiums, while residential premiums may see single-digit growth [34] Question: Are there geographic patterns in case reserves? - No significant geographic patterns were detected, but an increase in bodily injury claims and litigation was noted [45][46] Question: How does the company plan to react to loss trend changes? - The company will continue to adjust rates conservatively based on observed trends, focusing on risk selection and targeted rate increases [49][52]