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Old Republic International Corporation Message Board

  • bluelightspcl bluelightspcl Jan 27, 2011 10:32 PM Flag

    Dividend cut?

    Might be worth giving the conference call a listen. A question came up about the sustainability of the dividend.

    No talk of increases, for sure. Rather, they were fairly non-committal about maintaining it at the current level.

    I understand that their are limits to the extent of forward looking statements a company can comfortably make but this sounded like "no assurances" language if I ever heard it.

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    • Where did ya get that ideas..

    • I just think Aldo is a cautious person by nature and does not like to make predictions. Throughout the conference call, he hesitates to make future calls when asked to do so. It's important to note that he specifically refers to ORI's long history of maintaining dividends - he does not say long history of increasing dividends even though they have done so. He also says he wants to maintain this long history. To me, this indicates that the dividend will not only be maintained but may increase as it has done for the last few decades unless some unanticipated event comes up - and especially in the insurance business he has to leave that door open.

      • 1 Reply to tejay1y
      • I wouldn't be so sure. I think they have some concern over capital levels and what they can safely upstream to the holdco.

        When they acquired PMA Capital, they inherited about $60 million in 8.5% coupon debt. It's currently callable at par and the Company has a Baa1 credit rating. This debt is costing them over a million dollars a year in extra interest costs (not the interest on the note but the spread over where it could be refinanced). Why do you suppose they haven't called it? It's currently callable at par.

        I think they're focused on holding on to cash and, at some point, the dividend could become a source of cash for the holdco.

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