Now that the mortgage business has stabilized and is in fact adding to profits now, I think you see ORI get rerated higher. It is about 25% cheaper than peers based on many metrics and historical valuations, so it should move to in-line, I think this year.
Plus, it will have no problem increasing it's dividend again maintaining its dividend aristocrat status and people are still hunting for income with the low bond yields available.
Ouch, that hurt my portfolio value! I wish I had waited to add. But I did buy a few more shares on Friday. I'm looking for cash to buy more next week. The dividend is more than secure (they had no problem covering it in the middle of the financial crisis) and over time it will increase faster than .01 per year.
I think we got burned by two things on Thursday/Friday - one is what the caller referenced: existing shareholders get nothing from the spinoff of the runoff divisions. At the last attempt at a spinoff (that was nixed before it occurred) even though the new company wasn't going to be worth much, at least existing shareholders were going to get shares in it.
Second, the general market selloff. If the economy weakens, ORI's 2 divisions (that will remain after the spinoff) have some economic sensitivity. So perhaps the perception is that they will be stagnant until the economy gains momentum again. That's my best guess. I think it's a misplaced concern. The "new" ORI will be profitable in all economic conditions, although some years will be better than others.
At this point the spinoff can't happen fast enough for me. It's holding us back. The company can and will increase the dividend at a faster rate once the MI/CCI divisions are officially gone. But they have to be officially gone. It should happen very soon. But in his usual unconcern over what investors think, crusty old Al didn't try to alleviate everyone's concerns over it. If he can get the deal done in a few weeks, maybe we'll be seeing a modest boost in the dividend this year - possibly .04 (.01 per quarter) instead of .01 per year as we've seen since the financial crisis. Then even more in 2015 and beyond. Particularly for income investors, this selloff is a great opportunity.
All I can say is thanks for your post and the info is very helpful to me as a new investor in ORI not even getting my 1st Divd. yet but have already added shares on "Bad Friday" can't fathom how are good ER got ran over like a train by the Market!
Very curious that some one is selling after the earnings. I heard the call and one group was unhappy that the company was looking out for policy holders and not shareholders. in the long run that is going to be good for shareholders.
Insurance is a long term game, highlight by short term events (insured losses). Once the runoff is gone, or nearly complete, they company won’t need to justify each action to overbearing regulators. If the company can continue to increase revenue, control costs and losses, runoff the prior mistakes, we’ll all be fine especially in an increasing yield market from the treasury. Now that we are in the mid-teens again, I’m going to add to my very long position and smile at the divis each quarter.
Still #9 highest yield on the list of dividend champions and dividend easily covered, growing book value. Most of the other yield-type insurance companies have moved back to higher valuations, so ORI will get there. Maybe it's still a bit messy for some investors to get into.