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OLD REPUBLIC REPORTS RESULTS FOR THE FIRST QUARTER 2022

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Cision

CHICAGO, April 28, 2022 /PRNewswire/ --








OVERALL RESULTS






Quarters Ended March 31,



2022


2021


% Change

Pretax income (loss)


$ 382.6


$ 630.6



Pretax investment gains (losses)


145.1


375.4



Pretax income (loss) excluding investment gains (losses)


$ 237.5


$ 255.1


-6.9 %








Net income (loss)


$ 306.3


$ 502.1



Net of tax investment gains (losses)


114.5


295.7



Net income (loss) excluding investment gains (losses)


$ 191.7


$ 206.3


-7.0 %








PER DILUTED SHARE










Quarters Ended March 31,



2022


2021


% Change

Net income (loss)


$ 1.00


$ 1.68



Net of tax investment gains (losses)


.37


.99



Net income (loss) excluding investment gains (losses)


$ .63


$ .69


-8.7 %








SHAREHOLDERS' EQUITY










March 31,


Dec. 31,





2022


2021


% Change

Total


$ 6,750.1


$ 6,893.2


-2.1 %

Per Common Share


$ 22.23


$ 22.76


-2.3 %


All amounts in this report are stated in millions except where noted, common stock data and percentages.

Old Republic International Corporation (NYSE: ORI) today reported pretax income, excluding investment gains, of $237.5 for the quarter. The decline compared to the 2021 period, is within our expectations as increasing mortgage interest rates began to affect Title Insurance results. Both General Insurance and Title Insurance produced solid underwriting results that drove a consolidated combined ratio of 91.9% for the quarter.

Consolidated net premiums and fees earned was $1.9 billion for the quarter representing growth of 4.4% compared to the 2021 period. General Insurance net earned premiums grew by 6.0%, while Title Insurance growth in premium and fees was tempered by lower revenues within their direct operations. Net investment income increased slightly for the quarter, reflecting growth in the invested asset base, offset by lower investment yields earned.

Book value per share was $22.23 as of March 31, 2022, reflecting interest rate driven unrealized losses in the fixed income portfolio, offset by operating earnings. With the addition of dividends declared during the quarter, this was a decrease of 1.3% over year-end 2021.

Old Republic's business is managed for the long run. In this context management's key objectives are to achieve highly profitable operating results over the long term, and to ensure balance sheet strength for the primary needs of the insurance subsidiaries' underwriting and related services business. In this view, the evaluation of periodic and long-term results excludes consideration of all investment gains (losses). Under Generally Accepted Accounting Principles (GAAP), however, net income, inclusive of investment gains (losses), is the measure of total profitability.

In management's opinion, the focus on income excluding investment gains (losses), also described herein as segment pretax operating income (loss), provides a better way to analyze, evaluate, and establish accountability for the results of the insurance operations. The inclusion of realized investment gains (losses) in net income can mask trends in operating results, because such realizations are often highly discretionary. Similarly, the inclusion of unrealized investment gains (losses) in equity securities can further distort such operating results with significant period-to-period fluctuations.


FINANCIAL HIGHLIGHTS




Quarters Ended March 31,



SUMMARY INCOME STATEMENTS:

2022


2021


% Change



Revenues:








Net premiums and fees earned

$ 1,919.0


$ 1,838.9


4.4 %



Net investment income

106.2


104.3


1.8



Other income

36.2


36.3


-0.1



Total operating revenues

2,061.5


1,979.6


4.1



Investment gains (losses):








Realized from actual transactions

65.2


7.8





Unrealized from changes in fair value of equity securities

79.8


367.5





Total investment gains (losses)

145.1


375.4





Total revenues

2,206.6


2,355.0





Operating expenses:








Claim costs

607.9


603.4


0.8



Sales and general expenses

1,199.0


1,110.3


8.0



Interest and other charges

16.9


10.6


59.0



Total operating expenses

1,823.9


1,724.4


5.8 %



Pretax income (loss)

382.6


630.6





Income taxes (credits)

76.3


128.5





Net income (loss)

$ 306.3


$ 502.1





















COMMON STOCK STATISTICS:








Components of net income (loss) per share:








Basic net income (loss) excluding investment gains (losses)

$ 0.63


$ 0.69


-8.7 %



Net investment gains (losses):








Realized from actual transactions

0.17


0.02





Unrealized from changes in fair value of equity securities

0.21


0.97





Basic net income (loss)

$ 1.01


$ 1.68





Diluted net income (loss) excluding investment gains (losses)

$ 0.63


$ 0.69


-8.7 %



Net investment gains (losses):








Realized from actual transactions

0.17


0.02





Unrealized from changes in fair value of equity securities

0.20


0.97





Diluted net income (loss)

$ 1.00


$ 1.68





Cash dividends on common stock

$ 0.23


$ 0.22





Book value per share

$ 22.23


$ 21.59


3.0 %


















We believe the information presented in the following table highlights the most meaningful indicators of ORI's segmented and consolidated financial performance. The information underscores the performance of our underwriting operations, as well as our sound investment of the capital and underwriting cash flows from these operations.

Sources of Consolidated Income (Loss)



Quarters Ended March 31,


2022


2021


% Change

A. Net premiums, fees, and other income:






General insurance

$ 910.9


$ 859.1


6.0 %

Title insurance

998.9


967.7


3.2

Corporate & other

2.4


2.8


-13.3

Other income

36.2


36.3


-0.1

Subtotal

1,948.7


1,866.0


4.4

RFIG run-off

6.5


9.2


-29.0

Consolidated

$ 1,955.2


$ 1,875.2


4.3 %







B. Underwriting and related services income (loss):






General insurance

$ 76.3


$ 71.9


6.2 %

Title insurance

70.2


93.8


-25.2

Corporate & other

(6.1)


(6.0)


-0.4

Subtotal

140.4


159.7


-12.0

RFIG run-off

7.7


1.7


N/M

Consolidated

$ 148.2


$ 161.4


-8.2 %







C. Consolidated underwriting ratio:






Claim ratio:






Current year

34.1 %


34.6 %



Prior years

(2.4)


(1.8)



Total

31.7


32.8



Expense ratio

60.2


58.1



Combined ratio

91.9 %


90.9 %









D. Net investment income:






General insurance

$ 82.4


$ 84.8


-2.8 %

Title insurance

11.3


10.5


7.6

Corporate & other

10.4


5.7


81.8

Subtotal

104.2


101.1


3.1

RFIG run-off

2.0


3.2


-36.2

Consolidated

$ 106.2


$ 104.3


1.8 %







E. Interest and other charges (credits):






General insurance

$ 16.3


$ 16.0



Title insurance

0.5


0.6



Corporate & other (a)


(5.9)



Subtotal

16.9


10.6



RFIG run-off




Consolidated

$ 16.9


$ 10.6


59.0 %







F. Segmented and consolidated pretax income (loss)






excluding investment gains (losses)(B+D-E):






General insurance

$ 142.5


$ 140.8


1.2 %

Title insurance

80.9


103.7


-21.9

Corporate & other

4.2


5.6


-24.6

Subtotal

227.7


250.1


-9.0

RFIG run-off

9.7


4.9


97.0

Consolidated

237.5


255.1


-6.9 %

Income taxes (credits) on above (b)

45.7


48.8



G. Net income (loss) excluding






investment gains (losses)

191.7


206.3


-7.0 %

H. Consolidated pretax investment gains (losses):

Realized from actual transactions

65.2


7.8



Unrealized from changes in






fair value of equity securities

79.8


367.5



Total

145.1


375.4



Income taxes (credits) on above

30.5


79.6



Net of tax investment gains (losses)

114.5


295.7



I. Net income (loss)

$ 306.3


$ 502.1



J. Consolidated operating cash flow

$ 278.4


$ 296.0










(a) Includes consolidation/elimination entries. (b) The effective tax rates applicable to pretax income excluding investment gains (losses) were 19.3% and 19.1% for the first quarter 2022 and 2021, respectively.

General Insurance Segment Results



General Insurance


Summary Operating Results


Quarters Ended March 31,


2022


2021


% Change

Net premiums written

$ 960.8


$ 871.2


10.3 %

Net premiums earned

910.9


859.1


6.0

Net investment income

82.4


84.8


-2.8

Other income

35.9


36.0


-0.2

Operating revenues

1,029.4


980.0


5.0

Claim costs

582.2


567.3


2.6

Sales and general expenses

288.3


255.8


12.7

Interest and other charges

16.3


16.0


2.0

Operating expenses

886.9


839.2


5.7

Segment pretax operating income (loss)

$ 142.5


$ 140.8


1.2 %







Claim ratio

63.9 %


66.0 %



Expense ratio

27.7


25.6



Combined ratio

91.6 %


91.6 %



General Insurance net premiums earned increased 6.0% for the quarter, with rising premiums in commercial auto, financial indemnity, and property lines of coverage. Strong premium rate increases for most lines of coverage, other than workers' compensation, high renewal retention ratios, and new business production all contributed. Net investment income decreased slightly in the quarter, reflecting lower investment yields earned, partially offset by growth in the invested asset base.

The reported claim ratio for General Insurance improved in the quarter, inclusive of favorable reserve development from prior periods and a lower current period claim provision, attributable to several years of premium rate increases, underwriting actions, and a shift in the line of coverage mix.

The first quarter expense ratio was elevated compared to the same quarter last year, generally reflecting the shift in line of coverage mix, and an increase in employee costs, including the timing of certain benefit accruals. Investments in new products and geographies in recent years have diversified the General Insurance business, resulting in shifts in the lines of coverage mix toward lines with higher expense ratios and lower current period claim ratios.

Together, these factors produced greater pretax operating income for the period reported.

The following table shows recent annual and interim periods' claim ratios and the effects of claim development trends:






Effect of Prior Periods'










(Favorable)/


Claim Ratio Excluding


Reported


Unfavorable Claim


Prior Periods' Claim


Claim Ratio


Reserves Development


Reserves Development

2017


71.8 %




0.7 %




71.1 %


2018


72.2







72.2


2019


71.8




0.4




71.4


2020


69.9




(0.8)




70.7


2021


64.8 %




(3.8) %




68.6 %


1st Quarter 2021


66.0 %




(2.7) %




68.7 %


1st Quarter 2022


63.9 %




(3.2) %




67.1 %


Quarterly and annual claim ratios and trends may not be indicative of future outcomes for a business with relatively long claim payment patterns. We target combined ratios between 90% and 95%, and based on our historical line of coverage mix, a claim ratio average in the high 60% to low 70% range, and an expense ratio average of 25%. These components of the combined ratio will continue to reflect the line of coverage mix.

Title Insurance Segment Results



Title Insurance


Summary Operating Results


Quarters Ended March 31,