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Here's Why You Should Buy Old Republic (ORI) Stock Now

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Zacks Equity Research
·3 min read
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Old Republic International Corporation ORI should continue to benefit from segmental strength and solid capital position. This primarily specialty commercial lines underwriter carries a favorable VGM Score of B.

Return on equity of 10.2% in the trailing 12 months was slightly better than the industry average of 7.7%, reflecting Old Republic International’s unique combination of specialty property and casualty and Title franchises that also offers diversification.

The Zacks Consensus Estimate for 2020 and 2021 earnings has moved up 11.8% and 6.5% in the past 60 days, respectively, reflecting analysts’ optimism. It delivered positive earnings surprise in the last five quarters with the average being 39.62%.

Old Republic International remains focused on expanding presence in the commercial real estate market. The company’s 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 in the last 15 years.

Its General Insurance segment has been a significant and consistent driver of income. It should continue to deliver sustained growth and stable underwriting profitability, given its niche focus and low property catastrophe exposure. Its general insurance business ranks among the nation’s 50 largest insurers. The segment delivered a combined ratio of less than 100 in 14 of the last 15 years, with the average being 96. The company targets combined ratio of less than 95 going forward.

With improving cash balance and leverage ratio, the third-largest title insurer in the country has been strengthening its balance sheet. The company enjoys strong rating from credit-rating agencies. Also, 96% of its investment portfolio is investment grade.

This Zacks Rank #2 (Buy) multiline insurer increased dividend for 39 straight years. Its dividend currently yields 4.5%, better than the industry average of 2.2%, making this an attractive pick for yield-seeking investors.

Shares of Old Republic have lost 16.9% year to date compared with the industry's decline of 11.3%.

Nonetheless, shares of the company are trading at a discount than the industry average. Its price to book value of 0.93X is lower than the industry average of 1.2X. 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 (Strong Buy) or #2 are the best investment bets.

Other Stocks to Consider

Some other top-ranked insurers from the same space are Radian Group RDN, The Hartford Financial Services Group HIG and Horace Mann Educators Corporation HMN, each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Radian delivered earnings surprise of 22.93% in the last reported quarter.

The Hartford Financial delivered earnings surprise of 65.91% in the last reported quarter.

Horace Mann Educators delivered an earnings surprise of 13.89% in the last-reported quarter.

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The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
Radian Group Inc. (RDN) : Free Stock Analysis Report
Old Republic International Corporation (ORI) : Free Stock Analysis Report
Horace Mann Educators Corporation (HMN) : Free Stock Analysis Report
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