NEW YORK (AP) -- Shares of Old Republic International Corp. tumbled Monday in their second-straight day of trading after the insurance underwriter said it had withdrawn plans to spin off a subsidiary.
THE SPARK: The Chicago-based company said Friday it changed it plans after stakeholders raised concerns that the spinoff of Republic Financial Indemnity Group would be "disadvantageous to their interests and expectations."
THE BIG PICTURE: Old Republic said in May that it sold a 20.6 percent stake in the subsidiary to a group of investors as part of a partial leveraged buyout plan to ultimately make the unit a stand-alone company. The company planned to spin off its remaining shares as a taxable dividend in-kind to its shareholders.
The company previously said that it was making the move as part of a plan to combine its two lines of mortgage guaranty and consumer credit indemnity products, while separating them from the rest of the business. Those product lines had been hurt by cumulative losses that eroded the capital base supporting them as the housing market collapsed and credit card defaults spiked during the financial crisis.
THE ANALYSIS: Raymond James analyst C. Gregory Peters backed his "Market Perform" rating for Old Republic, but said that the company's stock could fall as much as 20 percent on worries about the future of the troubled mortgage guaranty business.
"We also believe it is now unlikely that management will be able to successfully divest Old Republic's mortgage guaranty operations, so the segment will continue to plague results going forward," Peters wrote in a note to investors.
THE SHARES: Old Republic stock fell $1.03, or 11 percent, to $8.24 in heavy afternoon trading, after falling as low as $8.20 earlier in the day. The losses came on top of Friday's 12 percent drop.
Over the past 52 weeks, the company's shares have traded between $7.15 and $12.20.