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Old Republic International Corporation Message Board

  • aosjdhdjduryffjfjfj aosjdhdjduryffjfjfj Jul 20, 2012 7:59 PM Flag

    dividend is not sustainable and will be cut

    my opinion is a 66 percent cut is coming soon.

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    • according to Aldo: CCI (i.e., ORICS) is within a general ins. subsidiary although ORICS website states they are a division of ORI and policies are underwritten by unclear what capital is at risk there...i don't recall hearing there is no capital at risk (ala MI)....good Q for today's call

    • CCI is also a separate entity, Old Republic Insured Credit Services - it is one of 12 seperate companies within the General Insurance Group.

      Your prior post is consistent w my understanding - NC could only clawback from holdco prior dividends from the NC sub - and there are none.

    • well NC statute says that only the previous year's distribution from MI (zero!) is at risk.

      also, looking at NC's order, it appears that they must have (or should have) had prior approval for the spin off

      so that leaves us with the GSE's being the most likely candidates who complained -> they want the tax transfers + no CCI

      I feel reasonably confident in the firewall...however, CCI liabilities are gnawing at me....they have suits and countersuits against BOA and countrywide...for policies they rescinded...+ still a fair amount of risk in force there

    • but the cash can't stay in the subs, it is the holdco that pays dividends, not the subs directly, at some point it has to go through the holdco, someone forced the holdco to abandon the spinoff, who was it, and what else can they force the holdco to do, remember, other ori subs have to get approval in all states to operate...

    • most likely the convert would be re-struck somewhere around $10 (vs 15.5) so its still "dilutive" but having that monkey off their back should be good

    • well that was my question....i see that as long as the cash remains in the subs, NC or claim holders can't get at it....but what if it is at the holding co? Obviously a legal issue.

    • fair enough...i guess one would expect the risk-premium surrounding paying off the note to dissipate if there was an equity for debt swap so on the one hand there would be more shares but on the other they've ridden themselves of the note....

    • agree - was just saying in the worst case they would be better off cutting dividend and getting low cost funding versus issuing equity -

    • First of all, I don't think they'll have to do either. Like I said, there is no incentive for anyone to force the MI division into bankruptcy. The court would either do what's alreadty happening - or even worse, the creditors could get less or nothing.

      Second, I understand your general statement that a new creditor might try to implement restrictions with a loan - which might include a dividend cut. But that assumes ORI would not be in the driver's seat and wouldn't have more than one possible source. I don't believe that's true.

      ORI retiredover $300 million in debt already this year. I believe their balance sheet is strengthening. This isn't 2008 where ORI is looking bleak with all the other financial companies, when credit had dried up.

      And with their cash flow improving, sans the MI division, I think they'd be able to borrow the money. They could always do it through bonds, and not a bank loan, if the banks were too stingy.

    • I don't think they will issue equity at 70% of book, or whatever the valuation is now - would make more sense to cut the dividend.

      FNF reported good title results today, would expect ORI also had decent quarter in title. Commercial I am expecting relatively flat, maybe up slightly. Agree there will be some slow growth here - when rates eventually move up there could be a very substantial step up in invest income - but that is prob a 2015 event.

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