First, ORI thinks its own stock is worth less than the market is saying.
Second, ORI thinks PMI and MTG are punished too much by the market.
Third, ORI is playing defensively because bargain hunters are buying ORI stock and ORI doesn't want to be taken over or pushed by some hedge funds. This may turn out to be the true reason for ORI's involvement in PMI and MTG.
Fourth, by investing in PMI and MTG, ORI gets the potential opportunity to buy out some competitors if the mkt deteriorates much further.
No matter how you look at it, ORI itself was too expensive before the deal. But now with PMI and MTG, ORI might have turned the table around and is worth buying.
Interesting point. I would argue that the "subprime shakeout" allows for the normal darwinian cycle to take place. The small fish and/or risky companies that flew high durin the bubble are now floating belly up at the top of the tank and the bigger fish, with more stable portfolios (and who have survived similar shakeouts) are feasting on the remains. The housing market, like all areas of the economy, have a certain ebb and flow. Housing may be down today, but 6 months, a year, or 5 years from now it will be back and that's exactly the way ORI operates (note it's uninterrupted streak of dividend increases, it's position in the broader title/insurance industry, etc..). These acquisitions make ORI stronger IN THE LONG RUN, not necessarily today. People who think insurance stocks are like tech companies or pump and dump investments misread. These are companies that slowly, mercilessly, and efficiently scoop up market share over the long term and then throw off cash like there is no tomorrow.