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Here's Why You Should Add Old Republic (ORI) to Your Portfolio

Zacks Equity Research
·4 mins read

Old Republic International Corporation ORI is well-poised for growth, riding on solid segmental performances and prudent capital management. The company currently carries an impressive VGM Score of A.

The Zacks Consensus Estimate for 2020 and 2021 earnings has moved up 12% and 16% in the past 60 days, reflecting analysts’ optimism. Return on equity of 10.1% in the trailing 12 months was better than the industry average of 7.7%, reflecting the company’s efficiency in utilizing shareholders’ funds.

Given operational excellence, this primarily specialty commercial lines underwriter has a Growth Score of A. It boasts the third-largest title insurer in the country, while its general insurance business ranks among the nation’s 50 largest insurers.

The company’s General Insurance segment, which is a significant and consistent driver of income, has been generating improved premiums over the past several years, witnessing a six-year CAGR (2014-2019) of 3.9%. The segment has been delivering sustained growth and stable underwriting profitability, given its niche business focus and very low property catastrophe exposure. It boasts of delivering 14 of 15 years below a 100 combined ratio, with 96 average over 15 years. The company targets lower than 95 combined ratio, going forward.

Its Title Insurance business remains focused on expanding presence in the commercial real estate market. Low-single-digit loss ratio has been aiding the business to generate improved income from both growth and margin improvement. Its loss ratio averaged 5.5 for the last 15 years.

The company has a decent history of delivering positive earnings surprise in the last three reported quarters.

Further, the cash balance of this Zacks Rank #1 (Strong Buy) insurer increased over the last few years and debt to capital ratio improved. Its debt to capital ratio was 14 at first-quarter 2020 end, lower than the industry average of 30.3. The company enjoys strong rating from credit-rating agencies. Also, 96% of its investment portfolio is investment grade.

Old Republic prudently manages capital to enhance shareholder value.  The company has been paying dividends for the last 79 years, with annual cash dividend been raised for each of the past 39 years. Its dividend yield of 5.3% betters the industry average of 2.8%, making this an attractive pick for yield-seeking investors.

Shares of Old Republic have lost 29.1% year to date compared with the industry's decline of 27.2%.

 

Nonetheless, shares of the company are trading at a discount than the industry average. Its price to book value of 0.94X is lower than the industry average of 1.02X. The stock carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 or #2 (Buy) are the best investment bets.

Other Stocks to Consider

Some other top-ranked companies in the insurance industry are Cigna Corporation CI, EverQuote Inc. EVER and Kemper Corporation KMPR, each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cigna provides insurance, and related products and services. The company posted a 5.63% positive earnings surprise in the last reported quarter.

EverQuote operates an online marketplace for insurance shopping in the United States. The company posted a 16.67% positive earnings surprise in the last reported quarter.

Kemper provides property and casualty, and life and health insurance in the United States. The company posted a 16.83% positive earnings surprise in the last reported quarter.

Zacks Top 10 Stocks for 2020

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Cigna Corporation (CI) : Free Stock Analysis Report
 
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Old Republic International Corporation (ORI) : Free Stock Analysis Report
 
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Zacks Investment Research