NYSE:ORI Old Republic International Q4 2024 Earnings Report $38.35 +0.38 (+1.00%) As of 03:53 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Old Republic International EPS ResultsActual EPS$0.90Consensus EPS $0.71Beat/MissBeat by +$0.19One Year Ago EPSN/AOld Republic International Revenue ResultsActual RevenueN/AExpected Revenue$2.11 billionBeat/MissN/AYoY Revenue GrowthN/AOld Republic International Announcement DetailsQuarterQ4 2024Date1/23/2025TimeBefore Market OpensConference Call DateThursday, January 23, 2025Conference Call Time3:00PM ETUpcoming EarningsOld Republic International's next earnings date is estimated for Thursday, April 24, 2025, based on past reporting schedules. Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Old Republic International Q4 2024 Earnings Call TranscriptProvided by QuartrJanuary 23, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Old Republic International 4th Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:28I would now like to turn the conference over to Joe Calabrese with the Financial Relations Board. Please go ahead. Joe CalabreseFinancial Relations Board at Old Republic International00:00:34Thank you, Regina. Good afternoon, everyone, and thank you for joining us on the Old Republic conference call to discuss Q4 2024 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at www dotoldrepublic.com. Please be advised that this call may involve forward looking statements as discussed in the press release and financial supplement dated January 23, 2025. Joe CalabreseFinancial Relations Board at Old Republic International00:01:07Risks associated with these statements can be found in the company's latest SEC filings. Presenting on today's conference call will be Craig Smitty, President and CEO Frank Sodaro, Chief Financial Officer and Carolyn Marmoe, President and CEO of Royal Republic's National Title Insurance Group. Management will make some opening remarks and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir. Craig SmiddyPresident and CEO at Old Republic International00:01:33Okay. Thank you, Joe. Good afternoon, and welcome again to Old Republic's 4th quarter year end 2024 earnings call. So during the Q4, we produced $285,000,000 of consolidated pretax operating income, up from $237,000,000 in 2023. Our consolidated combined ratio was 92.7% and that compares to 93.3% in the Q4 of last year. Craig SmiddyPresident and CEO at Old Republic International00:02:07As we noted in the release, we've renamed our General Insurance segment to Specialty Insurance. We believe Specialty more appropriately reflects our Specialty P and C strategy with 17 underwriting subsidiaries focused on unique specialty niche markets. So in Specialty Insurance, we grew net premiums earned by 13% in the 4th quarter and produced $228,000,000 of pretax operating income. That's up from $195,000,000 last year. The Specialty Insurance combined ratio was 91.8 in the quarter and that compares to 92 percent last year. Craig SmiddyPresident and CEO at Old Republic International00:02:53Despite the continuation of higher mortgage interest rates and a tight real estate market, title insurance grew premiums and fees by 9% in the 4th quarter and produced $55,000,000 of pretax operating income, up from $44,000,000 last year. The title insurance combined ratio was 94.4% in the quarter and that compares to 95.5% last year. Our conservative reserving practices continue to produce both favorable prior year development in the Specialty Insurance and Title Insurance segments. And Frank will talk a little bit more about that as we get to his remarks. Our balance sheet remains strong even as we returned large amounts of capital to shareholders through both dividends and share repurchases. Craig SmiddyPresident and CEO at Old Republic International00:03:56We declared a special dividend of $2 per share in the Q4, which reduced our book value per share by that same $2 amount. While we continue to return excess capital to shareholders, we also continue to manage for the long run investing in new specialty underwriting subsidiaries, technology and talent. And on that front, you may have seen earlier this month, we announced our latest new underwriting venture Old Republic Cyber. So I'll now turn the discussion over to Frank and then Frank will turn things back to me to cover Specialty Insurance followed by Carolyn, who will discuss Title Insurance and then we'll open it up for our usual Q and A and conversation. So with that, Frank, I hand it over to you. Frank SodaroCFO at Old Republic International00:04:48Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $227,000,000 for the quarter compared to $190,000,000 last year. On a per share basis, comparable year over year results were $0.90 compared to $0.69 last year. Net investment income increased 10% 16% in the quarter year respectively, driven by higher yields on the bond portfolio. Our average reinvestment rate on corporate bonds during the year was 4.8%, while the comparable book yield on corporate bonds disposed of was 3.5%. Frank SodaroCFO at Old Republic International00:05:28The total bond portfolio book yield now stands at 4.5% compared to 4% at the end of last year. During the quarter, the value of our total investment portfolio decreased by about $400,000,000 However, we ended the full year up over $100,000,000 Turning now to loss reserves. In the quarter, the consolidated loss ratios benefited from favorable development by 2.9 percentage points compared to 4.7% last year. As expected, the lower level in the quarter came primarily from Specialty Insurance and was consistent with the full year results. I'll now give some line of coverage details. Frank SodaroCFO at Old Republic International00:06:12Commercial auto and workers' comp continued to have strong favorable development, although lower than last year. Property also experienced strong favorable development and was higher than last year. The favorable development in these lines were partially offset by unfavorable development in general liability, which was spread across multiple subsidiaries and accident years and in transactional risk, which is included within financial indemnity. This recent experience aided our decision to exit transactional risk, which contributed less than $20,000,000 of premium in 2024. We ended the quarter with book value per share of $22.84 which inclusive of both the ordinary dividends and the $2 special dividend declared in the quarter equated to an increase of 11% for the year, resulting primarily from our strong operating earnings. Frank SodaroCFO at Old Republic International00:07:09In the quarter, we declared nearly $560,000,000 of dividends and repurchased $174,000,000 worth of our shares, bringing the total capital return this year to just over $1,700,000,000 Since the end of the quarter, we repurchased another $25,000,000 worth of shares, leaving us with about $205,000,000 remaining on our current repurchase program. I'll now turn the call back over to Craig for a discussion of Specialty Insurance. Craig SmiddyPresident and CEO at Old Republic International00:07:40Okay. Thanks, Frank. Specialty Insurance net written premiums were up 16% in the Q4 with strong renewal retention ratios, rate increases on most lines of coverage, new business growth and an increasing premium production in our new specialty underwriting subsidiaries. Craig SmiddyPresident and CEO at Old Republic International00:08:02Our E and S premiums grew by 21% in the quarter and 33% for the year. So we ended the year with $611,000,000 of surplus lines direct written premium. As I mentioned in my opening remarks, in the Q4, Specialty Insurance pretax operating income was $228,000,000 while full year 2024 pretax operating income was $848,000,000 and the 4th quarter combined ratio was 91.8 while the full year combined ratio was 92.2. The full year combined ratio was 2 points higher than the full year 2023 combined ratio, which reflects the anticipated lower level of favorable prior year loss reserve development somewhat offset by an improvement in the 2024 current year loss ratio. So given these top line and bottom line results, we continue to grow at a strong clip and at a very profitable level within Specialty Insurance. Craig SmiddyPresident and CEO at Old Republic International00:09:18Providing some more color and details. The loss ratio for the Q4 was 64.1%, including 2 point 4 percentage points of favorable prior year loss reserve development and that compares to 65.1% last year that included 5.1 points of favorable development offset by an increase to the 2023 current year loss ratio in the Q4 of 2023. The expense ratio was 27.7% in the 4th quarter and that compares to 26.9% last year, while the full year expense ratio was 28.1% and that compares to 28.2% for the full year of 2023. So these results are right in line with expectations and those ratios are holding steady for us. Now turning to property catastrophic losses that impacted the industry as a result of the Los Angeles wildfires. Craig SmiddyPresident and CEO at Old Republic International00:10:31First, of course, our thoughts remain with all of those in the disaster areas, which includes about 100 of our associates. You may recall, we write less catastrophic exposed business than most of our peers. So currently, we estimate our ultimate L. A. Wildfire losses to be between $10,000,000 $15,000,000 Now to provide you with some details on commercial auto and workers' compensation. Craig SmiddyPresident and CEO at Old Republic International00:11:03Commercial auto net premiums written grew 15% the Q4, while the loss ratio came in at 77.9% and that compares to 78.3% last year. The full year loss ratio was 72.4% percent compared to full year 2023 percent of 71.5 percent. Rate increases for commercial auto were approximately 10% and consistent what we've said in the last several quarters and really several years, those rate increases are commensurate with the loss trends that we're observing. Workers' compensation net premiums written were about 1% higher in the 4th quarter, while the loss ratio came in at 35.5% compared to 42.6% last year, obviously, a lot of favorable development both this year and last year. The full year loss ratio was 48% compared to the full year 2023 loss ratio of 41.4%. Craig SmiddyPresident and CEO at Old Republic International00:12:14Loss frequency for work comp continues to decline, same story that we've seen for many years now, while the loss severity trend remains very stable. So given the higher wage trend within payroll, which again as a reminder is our rating base, So that's a benefit for us. And given the declining loss frequency trend, the stable loss severity trend, our rate decreases of about 4% allow us to remain at a competitive and adequate level when it comes to our current rates on workers' compensation. So we expect solid growth and profitability in Specialty Insurance to continue into 2025, which reflects the success of our specialty strategy and our operational excellence initiatives. We also expect continued growth and contributions from our new specialty underwriting subsidiaries that we've talked about. Craig SmiddyPresident and CEO at Old Republic International00:13:26So I'll now turn the discussion over to Carolyn to report on title insurance. Carolyn? Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:13:32Thank you, Craig. The Title Insurance Group reported premium and fee revenue for the quarter of $702,000,000 This represents an increase of 9% from the Q4 of 2023. Premium and fees produced in our direct operations represented 23% of revenue versus 21% in the Q4 of 2023. Directly produced premium fees were up 24% from the Q4 of last year, while agency produced premiums were up 5%. As shown in our recently enhanced financial supplement, new open title orders in our direct operations were up 26% during the Q4 of 2024 compared to the Q4 of last year. Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:14:18Nearly a third of the new residential orders during the quarter were refinanced transactions, continuing the trend that we saw last quarter. The 4th quarter included some large commercial transactions from our direct operations, pushing up our average revenue per commercial order. Total agency and direct commercial premiums increased moderately for the quarter and represented approximately 23% of net premiums earned in the Q4 of 2024 as compared to 21% in 2023. Our pretax operating income of $55,000,000 was an increase of 26% over Q4 of last year, bringing our full year pretax operating income to $144,000,000 We're pleased to report that our combined ratio for the quarter was 94.4% compared to 95.5% during the Q4 of 2023. This is an improvement of over 1 percentage point driven by a combination of increased revenue and expense management. Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:15:252023 2024 were challenging years for the real estate market. During the year, we watched the market pretty much bounce along the bottom and prepared for things to turn. Our 2024 revenues improved slightly over 2023 as buyers became accustomed to higher prices. Slightly improving rates coupled with strong homeowner equity pushed up refinance activity and newly built homes are starting to ease our inventory levels. We start 2025 mindful of where the market has been and encouraged by improvements in the broader economy and the overall direction of order counts of our direct operations. Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:16:04Our agency operations continue to assist agents with growing their market coverage. We are refocusing our technology efforts on integrated solutions that enable our agents to seamlessly connect to our customer portal. This will make it easier to do business with us regardless of which closing software is being used by our title agent. There will be more to come throughout 2025 on these technology solutions. Thank you. Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:16:31And with that, I'll give it back to Craig. Craig SmiddyPresident and CEO at Old Republic International00:16:34Okay, Carolyn. Thanks. So profitable growth continued in Specialty Insurance in 2020 4 and we remain very optimistic for Specialty Insurance in 2025 and beyond. And in Title Insurance, we've remained profitable and our optimism is increasing as revenue has shown modest growth over the last few quarters. Overall, our strong 2024 operating performance drove solid earnings per share, solid operating return on equity and solid book value growth, which enabled us to return a record amount of capital to our shareholders in 2024. Craig SmiddyPresident and CEO at Old Republic International00:17:16So that concludes our prepared remarks. And we'll now open up the discussion to Q and A, where I'll answer your questions or I'll ask Frank or Carolyn to help me out. Operator00:17:44Our first question will come from the line of Gregory Peters with Raymond James. Please go ahead. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:17:50Well, good afternoon, everyone. Craig SmiddyPresident and CEO at Old Republic International00:17:52Hi, Greg. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:17:55So I guess for the first question, and I know I appreciate the commentary you provided on the General Insurance business. As I was going through the supplement, I was particularly struck by the growth that you reported in general liability in home and auto warranty and in the property business on a year over year basis for the full year. So maybe and I know maybe some of this is tied in with some of the new business initiatives, but maybe you could dissect those 3 segments or sub segments and tell us what are the drivers there for the growth? Craig SmiddyPresident and CEO at Old Republic International00:18:41Sure, Craig. Right. So indeed a good amount of those premiums are coming from our new underwriting subsidiaries. When it comes to property, for instance, you have inland marine, one of our new underwriting subsidiaries is producing meaningful premiums. And as we note in the footnote there, our property includes our inland marine coverages. Craig SmiddyPresident and CEO at Old Republic International00:19:12And our E and S operation is also producing meaningful premiums at this point and that contributes to both property and general liability growth as well. And then on home and auto warranty, actually home warranty is down a bit as you might expect because of the real estate market and a lot of those home warranty products are provided in conjunction with the sale of a new home. But on the auto warranty side, we've entered into several new auto warranty agreements and the auto warranty is producing some fairly significant growth there. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:20:08Thanks. Thanks for that color. Just related to the Specialty Insurance segment, the biggest line of business for you by far and away is the commercial auto business. You talked about rate increases there. Maybe you could spend a minute and give us perspective on what you see going on from a competitive landscape perspective? Craig SmiddyPresident and CEO at Old Republic International00:20:34Sure. I would first just reiterate what we've now said for several quarters and several years. And that is that we have been since things really started to go sideways in 2018 2019 with respect to severity and legal system abuse and those things that are contributing to that severity. We have been very diligent at monitoring severity trend on a real time basis, adjusting rates as we go along. And we have now since that time period 5, 6, 7 years been getting double digit rate increases commensurate with the trend that we're seeing. Craig SmiddyPresident and CEO at Old Republic International00:21:33So we have stayed on top of it. As such, we've had favorable development compared to the industry, which has had unfavorable development. We've seen actually favorable development. And if you think about the fact that we jumped on it early that we monitor it as closely as we do and get rate changes commensurate with those severity trends. That compounding of rate has served us well. Craig SmiddyPresident and CEO at Old Republic International00:22:07And we are comfortable that as long as we stay current with the trends we're observing, we'll continue to be able to produce a profitable result there. So the industry, it really varies because as you know, you still have over the last year, we've seen a lot of competitors put up on favorable development and they've reacted in different ways. A lot of them raising rates substantially, which has created some opportunity for us, given that we've been more steady over the course of the last 5 or 6 years. And when it comes to severity, it seems like from some of the commentary of those competitors, they're still pointing to severity as the reason for their unfavorable development. But that's not a new story for us. Craig SmiddyPresident and CEO at Old Republic International00:23:06We recognize that severity back in 2018 2019 and we've stayed on top of it. We made major corrections immediately where we were getting rate increases that were upward toward even the high teens there for a while. And then we've just been getting the necessary rate increases since then in the 10% range to stay consistent with the severity trends we're seeing. So it seems like we're very comfortable with where we're at and that others are still trying to react and figure things out. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:23:51Makes sense. That's good color. I guess for the last question, ordinarily, Carolyn, I have one for Carolyn, but actually I'm going to change course and ask Frank a little bit about the investment portfolio. And I know with the yields having gone up in the last couple of years, I know there was a pivot a little bit away from the equity investment side, but it seems like that's kind of stabilized. So from a big picture perspective, just where are we with new money yields versus where the portfolio yield is? Gregory PetersManaging Director - Equity Research at Raymond James Financial00:24:33Have you done anything with duration? And what's your updated view on the balance between fixed income and equities? Frank SodaroCFO at Old Republic International00:24:43All right, Greg. I could dig into that a little bit. So I'll start with what your last question there. Where we're at now, which is about 84% in fixed, 16% in equities, we're pretty comfortable with that level and we're poised to go either way up and down if we have to depending on the opportunities that are out there, but we're comfortable where we're at. As far as new money, we are putting for the year, we were reinvesting at about 4.8% on corporate bonds and the portfolio yield right now is at 4.5% that fixed income portfolio. Frank SodaroCFO at Old Republic International00:25:24So is some room to go up, but there's that's definitely slowing down. As far as duration and credit quality and all that, we're we have not made material changes in that arena. So it's a pretty steady state, I would say, poised to move where there's opportunities. Craig SmiddyPresident and CEO at Old Republic International00:25:47Yes. Greg, I would just add to that that although we look at duration and we have some flexibility in our investment portfolio, we do try to match our liabilities so that the duration is reflective of our anticipated payment on those liabilities. Craig SmiddyPresident and CEO at Old Republic International00:26:12So we follow that principle and that still leaves us some flexibility. But as Frank said, generally, our duration is consistent with what we believe we need to do relative to our anticipated liabilities. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:26:36Makes sense. Thank you. Operator00:26:46We'll take our next question from the line of Paul Newsome with Piper Sandler. Please go ahead. Jon Paul NewsomeManaging Director at Piper Sandler Companies00:26:54Good afternoon. Craig SmiddyPresident and CEO at Old Republic International00:26:55Hi Paul. Thank you, Paul. Jon Paul NewsomeManaging Director at Piper Sandler Companies00:26:57I wanted to ask some capital management questions and maybe just sort of review and see if there's any changes in how you are thinking about your current capital position given the special dividends and dividends and the buybacks that you've done so far? And maybe you could talk a little bit about the trade off of capital usages, particularly looking at dividend versus stock repurchase and what's your thinking in that at the moment? Craig SmiddyPresident and CEO at Old Republic International00:27:32Sure, Paul. I'm happy to talk about that. So one of the nice things that we've had to deal with, if you want to call it a problem, it's really not is that as much as we've been returning to shareholders over the course of the last 3 or 4 years. We continue to refill the coffers if you will with very strong earnings and retained earnings. So we while we've tried to eliminate excess capital, we keep creating excess capital. Craig SmiddyPresident and CEO at Old Republic International00:28:14So we made a decision in the Q4 with the Board that we would issue the $2 special dividend as a way to return capital more quickly and in a single shot so to speak and get us to a level that is more consistent with an appropriate capital level. And at the same time, we retained our ability to continue to repurchase shares. And as Frank noted, we have about $200,000,000 still on that current share repurchase authorization. And as we said at the beginning of our share repurchase programs over the last few years, we are sensitive to price. And when we look at repurchasing shares, we will look at where we're trading and relative to our peers and where we see things. Craig SmiddyPresident and CEO at Old Republic International00:29:30And so we do either accelerate or temper our share repurchases depending on where we might be trading and we remain opportunistic in that regard. So that will continue. And those factors will all come into play next time we sit with our board and again review our capital position and the best most efficient way to return capital to shareholders. Jon Paul NewsomeManaging Director at Piper Sandler Companies00:30:03Is there a particular model that dominates how you consider what is excess capital or not excess capital at the moment? Craig SmiddyPresident and CEO at Old Republic International00:30:14Yes. I wouldn't say there's a particular model. We look at many different dimensions and measures when we look at capital. And we of course look at liquidity as well. And if we believe we have substantial liquidity and we have substantial capital, we then look at how much we think we might have in the way of excess capital looking at various different leverage metrics. Craig SmiddyPresident and CEO at Old Republic International00:30:56And of course, looking at our RBC ratios, looking at and having conversations with our rating agencies. So there's a lot of quantitative and qualitative analysis that comes into play when we look at our capital position. But right now, even with the special dividend and the share repurchases, all of our conversations, all of our metrics would continue to suggest that we certainly have sufficient capital and even some cushion beyond that. Jon Paul NewsomeManaging Director at Piper Sandler Companies00:31:37Thank you. Appreciate the help as always. Craig SmiddyPresident and CEO at Old Republic International00:31:40Thank you, Paul. Operator00:31:42And we have no further questions at this time. I'll hand the call back to management for any concluding remarks. Craig SmiddyPresident and CEO at Old Republic International00:31:49Okay. Well, we here at Old Republic feel very good about the Q4. We feel very good about 2024 and what we've been able to deliver to all of our stakeholders and our shareholders. And we remain even more optimistic when we look out at 2025 given the various initiatives that we have underway, given where we sit today. And again, we wish you all well in 2025 and look forward to seeing you next quarter and we'll continue to report on our progress. Craig SmiddyPresident and CEO at Old Republic International00:32:31So thank you all very much and have a great day. Operator00:32:36Everyone that will conclude today's call. Thank you all for joining and you may now disconnect.Read moreParticipantsExecutivesJoe CalabreseFinancial Relations BoardCraig SmiddyPresident and CEOFrank SodaroCFOCarolyn MonroeSenior Vice President of Title InsuranceAnalystsGregory PetersManaging Director - Equity Research at Raymond James FinancialJon Paul NewsomeManaging Director at Piper Sandler CompaniesPowered by Conference Call Audio Live Call not available Earnings Conference CallOld Republic International Q4 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Old Republic International Earnings HeadlinesOld Republic Q1 earnings beat, but fall sequentially, as combined ratio edges upApril 24 at 7:05 PM | msn.comOld republic international outlines 2025 specialty insurance growth strategy and enhanced profitability focusApril 24 at 7:05 PM | msn.comNow I look stupid. Real stupid... I thought what happened 25 years ago was a once- in-a-lifetime event… but how wrong I was. Because here we are, a quarter of a century later, almost to the exact day, and it’s happening again. April 24, 2025 | Porter & Company (Ad)Old Republic International (ORI) Q1 2025 Earnings Beat ExpectationsApril 24 at 10:14 AM | gurufocus.comOLD REPUBLIC REPORTS RESULTS FOR THE FIRST QUARTER 2025April 24 at 7:00 AM | prnewswire.comOld Republic International (ORI) Projected to Post Quarterly Earnings on ThursdayApril 23 at 2:37 AM | americanbankingnews.comSee More Old Republic International Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Old Republic International? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Old Republic International and other key companies, straight to your email. Email Address About Old Republic InternationalOld Republic International (NYSE:ORI), through its subsidiaries, engages in the insurance underwriting and related services business primarily in the United States and Canada. It operates through three segments: General Insurance, Title Insurance, and Republic Financial Indemnity Group Run-off Business. The General Insurance segment offers aviation, commercial auto, commercial multi-peril, commercial property, general liability, home and auto warranty, inland marine, travel accident, and workers' compensation insurance products; and financial indemnity products for specialty coverages, including errors and omissions, fidelity, directors and officers, and surety. This segment provides its insurance products to businesses, state and local government, and other institutions in transportation, commercial construction, healthcare, education, retail and wholesale trade, forest products, energy, general manufacturing, and financial services industries. The Title Insurance segment offers lenders' and owners' policies to real estate purchasers and investors based upon searches of the public records. This segment also provides escrow closing and construction disbursement services; and real estate information products, national default management services, and various other services pertaining to real estate transfers and loan transactions. The Republic Financial Indemnity Group Run-off Business segment offers private mortgage insurance coverage that protects mortgage lenders and investors from default related losses on residential mortgage loans made primarily to homebuyers. Old Republic International Corporation was founded in 1923 and is based in Chicago, Illinois.View Old Republic International ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InWhy It May Be Time to Buy CrowdStrike Stock Heading Into EarningsCan IBM’s Q1 Earnings Spark a Breakout for the Stock? 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PresentationSkip to Participants Operator00:00:00Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Old Republic International 4th Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:28I would now like to turn the conference over to Joe Calabrese with the Financial Relations Board. Please go ahead. Joe CalabreseFinancial Relations Board at Old Republic International00:00:34Thank you, Regina. Good afternoon, everyone, and thank you for joining us on the Old Republic conference call to discuss Q4 2024 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at www dotoldrepublic.com. Please be advised that this call may involve forward looking statements as discussed in the press release and financial supplement dated January 23, 2025. Joe CalabreseFinancial Relations Board at Old Republic International00:01:07Risks associated with these statements can be found in the company's latest SEC filings. Presenting on today's conference call will be Craig Smitty, President and CEO Frank Sodaro, Chief Financial Officer and Carolyn Marmoe, President and CEO of Royal Republic's National Title Insurance Group. Management will make some opening remarks and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir. Craig SmiddyPresident and CEO at Old Republic International00:01:33Okay. Thank you, Joe. Good afternoon, and welcome again to Old Republic's 4th quarter year end 2024 earnings call. So during the Q4, we produced $285,000,000 of consolidated pretax operating income, up from $237,000,000 in 2023. Our consolidated combined ratio was 92.7% and that compares to 93.3% in the Q4 of last year. Craig SmiddyPresident and CEO at Old Republic International00:02:07As we noted in the release, we've renamed our General Insurance segment to Specialty Insurance. We believe Specialty more appropriately reflects our Specialty P and C strategy with 17 underwriting subsidiaries focused on unique specialty niche markets. So in Specialty Insurance, we grew net premiums earned by 13% in the 4th quarter and produced $228,000,000 of pretax operating income. That's up from $195,000,000 last year. The Specialty Insurance combined ratio was 91.8 in the quarter and that compares to 92 percent last year. Craig SmiddyPresident and CEO at Old Republic International00:02:53Despite the continuation of higher mortgage interest rates and a tight real estate market, title insurance grew premiums and fees by 9% in the 4th quarter and produced $55,000,000 of pretax operating income, up from $44,000,000 last year. The title insurance combined ratio was 94.4% in the quarter and that compares to 95.5% last year. Our conservative reserving practices continue to produce both favorable prior year development in the Specialty Insurance and Title Insurance segments. And Frank will talk a little bit more about that as we get to his remarks. Our balance sheet remains strong even as we returned large amounts of capital to shareholders through both dividends and share repurchases. Craig SmiddyPresident and CEO at Old Republic International00:03:56We declared a special dividend of $2 per share in the Q4, which reduced our book value per share by that same $2 amount. While we continue to return excess capital to shareholders, we also continue to manage for the long run investing in new specialty underwriting subsidiaries, technology and talent. And on that front, you may have seen earlier this month, we announced our latest new underwriting venture Old Republic Cyber. So I'll now turn the discussion over to Frank and then Frank will turn things back to me to cover Specialty Insurance followed by Carolyn, who will discuss Title Insurance and then we'll open it up for our usual Q and A and conversation. So with that, Frank, I hand it over to you. Frank SodaroCFO at Old Republic International00:04:48Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $227,000,000 for the quarter compared to $190,000,000 last year. On a per share basis, comparable year over year results were $0.90 compared to $0.69 last year. Net investment income increased 10% 16% in the quarter year respectively, driven by higher yields on the bond portfolio. Our average reinvestment rate on corporate bonds during the year was 4.8%, while the comparable book yield on corporate bonds disposed of was 3.5%. Frank SodaroCFO at Old Republic International00:05:28The total bond portfolio book yield now stands at 4.5% compared to 4% at the end of last year. During the quarter, the value of our total investment portfolio decreased by about $400,000,000 However, we ended the full year up over $100,000,000 Turning now to loss reserves. In the quarter, the consolidated loss ratios benefited from favorable development by 2.9 percentage points compared to 4.7% last year. As expected, the lower level in the quarter came primarily from Specialty Insurance and was consistent with the full year results. I'll now give some line of coverage details. Frank SodaroCFO at Old Republic International00:06:12Commercial auto and workers' comp continued to have strong favorable development, although lower than last year. Property also experienced strong favorable development and was higher than last year. The favorable development in these lines were partially offset by unfavorable development in general liability, which was spread across multiple subsidiaries and accident years and in transactional risk, which is included within financial indemnity. This recent experience aided our decision to exit transactional risk, which contributed less than $20,000,000 of premium in 2024. We ended the quarter with book value per share of $22.84 which inclusive of both the ordinary dividends and the $2 special dividend declared in the quarter equated to an increase of 11% for the year, resulting primarily from our strong operating earnings. Frank SodaroCFO at Old Republic International00:07:09In the quarter, we declared nearly $560,000,000 of dividends and repurchased $174,000,000 worth of our shares, bringing the total capital return this year to just over $1,700,000,000 Since the end of the quarter, we repurchased another $25,000,000 worth of shares, leaving us with about $205,000,000 remaining on our current repurchase program. I'll now turn the call back over to Craig for a discussion of Specialty Insurance. Craig SmiddyPresident and CEO at Old Republic International00:07:40Okay. Thanks, Frank. Specialty Insurance net written premiums were up 16% in the Q4 with strong renewal retention ratios, rate increases on most lines of coverage, new business growth and an increasing premium production in our new specialty underwriting subsidiaries. Craig SmiddyPresident and CEO at Old Republic International00:08:02Our E and S premiums grew by 21% in the quarter and 33% for the year. So we ended the year with $611,000,000 of surplus lines direct written premium. As I mentioned in my opening remarks, in the Q4, Specialty Insurance pretax operating income was $228,000,000 while full year 2024 pretax operating income was $848,000,000 and the 4th quarter combined ratio was 91.8 while the full year combined ratio was 92.2. The full year combined ratio was 2 points higher than the full year 2023 combined ratio, which reflects the anticipated lower level of favorable prior year loss reserve development somewhat offset by an improvement in the 2024 current year loss ratio. So given these top line and bottom line results, we continue to grow at a strong clip and at a very profitable level within Specialty Insurance. Craig SmiddyPresident and CEO at Old Republic International00:09:18Providing some more color and details. The loss ratio for the Q4 was 64.1%, including 2 point 4 percentage points of favorable prior year loss reserve development and that compares to 65.1% last year that included 5.1 points of favorable development offset by an increase to the 2023 current year loss ratio in the Q4 of 2023. The expense ratio was 27.7% in the 4th quarter and that compares to 26.9% last year, while the full year expense ratio was 28.1% and that compares to 28.2% for the full year of 2023. So these results are right in line with expectations and those ratios are holding steady for us. Now turning to property catastrophic losses that impacted the industry as a result of the Los Angeles wildfires. Craig SmiddyPresident and CEO at Old Republic International00:10:31First, of course, our thoughts remain with all of those in the disaster areas, which includes about 100 of our associates. You may recall, we write less catastrophic exposed business than most of our peers. So currently, we estimate our ultimate L. A. Wildfire losses to be between $10,000,000 $15,000,000 Now to provide you with some details on commercial auto and workers' compensation. Craig SmiddyPresident and CEO at Old Republic International00:11:03Commercial auto net premiums written grew 15% the Q4, while the loss ratio came in at 77.9% and that compares to 78.3% last year. The full year loss ratio was 72.4% percent compared to full year 2023 percent of 71.5 percent. Rate increases for commercial auto were approximately 10% and consistent what we've said in the last several quarters and really several years, those rate increases are commensurate with the loss trends that we're observing. Workers' compensation net premiums written were about 1% higher in the 4th quarter, while the loss ratio came in at 35.5% compared to 42.6% last year, obviously, a lot of favorable development both this year and last year. The full year loss ratio was 48% compared to the full year 2023 loss ratio of 41.4%. Craig SmiddyPresident and CEO at Old Republic International00:12:14Loss frequency for work comp continues to decline, same story that we've seen for many years now, while the loss severity trend remains very stable. So given the higher wage trend within payroll, which again as a reminder is our rating base, So that's a benefit for us. And given the declining loss frequency trend, the stable loss severity trend, our rate decreases of about 4% allow us to remain at a competitive and adequate level when it comes to our current rates on workers' compensation. So we expect solid growth and profitability in Specialty Insurance to continue into 2025, which reflects the success of our specialty strategy and our operational excellence initiatives. We also expect continued growth and contributions from our new specialty underwriting subsidiaries that we've talked about. Craig SmiddyPresident and CEO at Old Republic International00:13:26So I'll now turn the discussion over to Carolyn to report on title insurance. Carolyn? Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:13:32Thank you, Craig. The Title Insurance Group reported premium and fee revenue for the quarter of $702,000,000 This represents an increase of 9% from the Q4 of 2023. Premium and fees produced in our direct operations represented 23% of revenue versus 21% in the Q4 of 2023. Directly produced premium fees were up 24% from the Q4 of last year, while agency produced premiums were up 5%. As shown in our recently enhanced financial supplement, new open title orders in our direct operations were up 26% during the Q4 of 2024 compared to the Q4 of last year. Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:14:18Nearly a third of the new residential orders during the quarter were refinanced transactions, continuing the trend that we saw last quarter. The 4th quarter included some large commercial transactions from our direct operations, pushing up our average revenue per commercial order. Total agency and direct commercial premiums increased moderately for the quarter and represented approximately 23% of net premiums earned in the Q4 of 2024 as compared to 21% in 2023. Our pretax operating income of $55,000,000 was an increase of 26% over Q4 of last year, bringing our full year pretax operating income to $144,000,000 We're pleased to report that our combined ratio for the quarter was 94.4% compared to 95.5% during the Q4 of 2023. This is an improvement of over 1 percentage point driven by a combination of increased revenue and expense management. Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:15:252023 2024 were challenging years for the real estate market. During the year, we watched the market pretty much bounce along the bottom and prepared for things to turn. Our 2024 revenues improved slightly over 2023 as buyers became accustomed to higher prices. Slightly improving rates coupled with strong homeowner equity pushed up refinance activity and newly built homes are starting to ease our inventory levels. We start 2025 mindful of where the market has been and encouraged by improvements in the broader economy and the overall direction of order counts of our direct operations. Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:16:04Our agency operations continue to assist agents with growing their market coverage. We are refocusing our technology efforts on integrated solutions that enable our agents to seamlessly connect to our customer portal. This will make it easier to do business with us regardless of which closing software is being used by our title agent. There will be more to come throughout 2025 on these technology solutions. Thank you. Carolyn MonroeSenior Vice President of Title Insurance at Old Republic International00:16:31And with that, I'll give it back to Craig. Craig SmiddyPresident and CEO at Old Republic International00:16:34Okay, Carolyn. Thanks. So profitable growth continued in Specialty Insurance in 2020 4 and we remain very optimistic for Specialty Insurance in 2025 and beyond. And in Title Insurance, we've remained profitable and our optimism is increasing as revenue has shown modest growth over the last few quarters. Overall, our strong 2024 operating performance drove solid earnings per share, solid operating return on equity and solid book value growth, which enabled us to return a record amount of capital to our shareholders in 2024. Craig SmiddyPresident and CEO at Old Republic International00:17:16So that concludes our prepared remarks. And we'll now open up the discussion to Q and A, where I'll answer your questions or I'll ask Frank or Carolyn to help me out. Operator00:17:44Our first question will come from the line of Gregory Peters with Raymond James. Please go ahead. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:17:50Well, good afternoon, everyone. Craig SmiddyPresident and CEO at Old Republic International00:17:52Hi, Greg. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:17:55So I guess for the first question, and I know I appreciate the commentary you provided on the General Insurance business. As I was going through the supplement, I was particularly struck by the growth that you reported in general liability in home and auto warranty and in the property business on a year over year basis for the full year. So maybe and I know maybe some of this is tied in with some of the new business initiatives, but maybe you could dissect those 3 segments or sub segments and tell us what are the drivers there for the growth? Craig SmiddyPresident and CEO at Old Republic International00:18:41Sure, Craig. Right. So indeed a good amount of those premiums are coming from our new underwriting subsidiaries. When it comes to property, for instance, you have inland marine, one of our new underwriting subsidiaries is producing meaningful premiums. And as we note in the footnote there, our property includes our inland marine coverages. Craig SmiddyPresident and CEO at Old Republic International00:19:12And our E and S operation is also producing meaningful premiums at this point and that contributes to both property and general liability growth as well. And then on home and auto warranty, actually home warranty is down a bit as you might expect because of the real estate market and a lot of those home warranty products are provided in conjunction with the sale of a new home. But on the auto warranty side, we've entered into several new auto warranty agreements and the auto warranty is producing some fairly significant growth there. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:20:08Thanks. Thanks for that color. Just related to the Specialty Insurance segment, the biggest line of business for you by far and away is the commercial auto business. You talked about rate increases there. Maybe you could spend a minute and give us perspective on what you see going on from a competitive landscape perspective? Craig SmiddyPresident and CEO at Old Republic International00:20:34Sure. I would first just reiterate what we've now said for several quarters and several years. And that is that we have been since things really started to go sideways in 2018 2019 with respect to severity and legal system abuse and those things that are contributing to that severity. We have been very diligent at monitoring severity trend on a real time basis, adjusting rates as we go along. And we have now since that time period 5, 6, 7 years been getting double digit rate increases commensurate with the trend that we're seeing. Craig SmiddyPresident and CEO at Old Republic International00:21:33So we have stayed on top of it. As such, we've had favorable development compared to the industry, which has had unfavorable development. We've seen actually favorable development. And if you think about the fact that we jumped on it early that we monitor it as closely as we do and get rate changes commensurate with those severity trends. That compounding of rate has served us well. Craig SmiddyPresident and CEO at Old Republic International00:22:07And we are comfortable that as long as we stay current with the trends we're observing, we'll continue to be able to produce a profitable result there. So the industry, it really varies because as you know, you still have over the last year, we've seen a lot of competitors put up on favorable development and they've reacted in different ways. A lot of them raising rates substantially, which has created some opportunity for us, given that we've been more steady over the course of the last 5 or 6 years. And when it comes to severity, it seems like from some of the commentary of those competitors, they're still pointing to severity as the reason for their unfavorable development. But that's not a new story for us. Craig SmiddyPresident and CEO at Old Republic International00:23:06We recognize that severity back in 2018 2019 and we've stayed on top of it. We made major corrections immediately where we were getting rate increases that were upward toward even the high teens there for a while. And then we've just been getting the necessary rate increases since then in the 10% range to stay consistent with the severity trends we're seeing. So it seems like we're very comfortable with where we're at and that others are still trying to react and figure things out. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:23:51Makes sense. That's good color. I guess for the last question, ordinarily, Carolyn, I have one for Carolyn, but actually I'm going to change course and ask Frank a little bit about the investment portfolio. And I know with the yields having gone up in the last couple of years, I know there was a pivot a little bit away from the equity investment side, but it seems like that's kind of stabilized. So from a big picture perspective, just where are we with new money yields versus where the portfolio yield is? Gregory PetersManaging Director - Equity Research at Raymond James Financial00:24:33Have you done anything with duration? And what's your updated view on the balance between fixed income and equities? Frank SodaroCFO at Old Republic International00:24:43All right, Greg. I could dig into that a little bit. So I'll start with what your last question there. Where we're at now, which is about 84% in fixed, 16% in equities, we're pretty comfortable with that level and we're poised to go either way up and down if we have to depending on the opportunities that are out there, but we're comfortable where we're at. As far as new money, we are putting for the year, we were reinvesting at about 4.8% on corporate bonds and the portfolio yield right now is at 4.5% that fixed income portfolio. Frank SodaroCFO at Old Republic International00:25:24So is some room to go up, but there's that's definitely slowing down. As far as duration and credit quality and all that, we're we have not made material changes in that arena. So it's a pretty steady state, I would say, poised to move where there's opportunities. Craig SmiddyPresident and CEO at Old Republic International00:25:47Yes. Greg, I would just add to that that although we look at duration and we have some flexibility in our investment portfolio, we do try to match our liabilities so that the duration is reflective of our anticipated payment on those liabilities. Craig SmiddyPresident and CEO at Old Republic International00:26:12So we follow that principle and that still leaves us some flexibility. But as Frank said, generally, our duration is consistent with what we believe we need to do relative to our anticipated liabilities. Gregory PetersManaging Director - Equity Research at Raymond James Financial00:26:36Makes sense. Thank you. Operator00:26:46We'll take our next question from the line of Paul Newsome with Piper Sandler. Please go ahead. Jon Paul NewsomeManaging Director at Piper Sandler Companies00:26:54Good afternoon. Craig SmiddyPresident and CEO at Old Republic International00:26:55Hi Paul. Thank you, Paul. Jon Paul NewsomeManaging Director at Piper Sandler Companies00:26:57I wanted to ask some capital management questions and maybe just sort of review and see if there's any changes in how you are thinking about your current capital position given the special dividends and dividends and the buybacks that you've done so far? And maybe you could talk a little bit about the trade off of capital usages, particularly looking at dividend versus stock repurchase and what's your thinking in that at the moment? Craig SmiddyPresident and CEO at Old Republic International00:27:32Sure, Paul. I'm happy to talk about that. So one of the nice things that we've had to deal with, if you want to call it a problem, it's really not is that as much as we've been returning to shareholders over the course of the last 3 or 4 years. We continue to refill the coffers if you will with very strong earnings and retained earnings. So we while we've tried to eliminate excess capital, we keep creating excess capital. Craig SmiddyPresident and CEO at Old Republic International00:28:14So we made a decision in the Q4 with the Board that we would issue the $2 special dividend as a way to return capital more quickly and in a single shot so to speak and get us to a level that is more consistent with an appropriate capital level. And at the same time, we retained our ability to continue to repurchase shares. And as Frank noted, we have about $200,000,000 still on that current share repurchase authorization. And as we said at the beginning of our share repurchase programs over the last few years, we are sensitive to price. And when we look at repurchasing shares, we will look at where we're trading and relative to our peers and where we see things. Craig SmiddyPresident and CEO at Old Republic International00:29:30And so we do either accelerate or temper our share repurchases depending on where we might be trading and we remain opportunistic in that regard. So that will continue. And those factors will all come into play next time we sit with our board and again review our capital position and the best most efficient way to return capital to shareholders. Jon Paul NewsomeManaging Director at Piper Sandler Companies00:30:03Is there a particular model that dominates how you consider what is excess capital or not excess capital at the moment? Craig SmiddyPresident and CEO at Old Republic International00:30:14Yes. I wouldn't say there's a particular model. We look at many different dimensions and measures when we look at capital. And we of course look at liquidity as well. And if we believe we have substantial liquidity and we have substantial capital, we then look at how much we think we might have in the way of excess capital looking at various different leverage metrics. Craig SmiddyPresident and CEO at Old Republic International00:30:56And of course, looking at our RBC ratios, looking at and having conversations with our rating agencies. So there's a lot of quantitative and qualitative analysis that comes into play when we look at our capital position. But right now, even with the special dividend and the share repurchases, all of our conversations, all of our metrics would continue to suggest that we certainly have sufficient capital and even some cushion beyond that. Jon Paul NewsomeManaging Director at Piper Sandler Companies00:31:37Thank you. Appreciate the help as always. Craig SmiddyPresident and CEO at Old Republic International00:31:40Thank you, Paul. Operator00:31:42And we have no further questions at this time. I'll hand the call back to management for any concluding remarks. Craig SmiddyPresident and CEO at Old Republic International00:31:49Okay. Well, we here at Old Republic feel very good about the Q4. We feel very good about 2024 and what we've been able to deliver to all of our stakeholders and our shareholders. And we remain even more optimistic when we look out at 2025 given the various initiatives that we have underway, given where we sit today. And again, we wish you all well in 2025 and look forward to seeing you next quarter and we'll continue to report on our progress. Craig SmiddyPresident and CEO at Old Republic International00:32:31So thank you all very much and have a great day. Operator00:32:36Everyone that will conclude today's call. Thank you all for joining and you may now disconnect.Read moreParticipantsExecutivesJoe CalabreseFinancial Relations BoardCraig SmiddyPresident and CEOFrank SodaroCFOCarolyn MonroeSenior Vice President of Title InsuranceAnalystsGregory PetersManaging Director - Equity Research at Raymond James FinancialJon Paul NewsomeManaging Director at Piper Sandler CompaniesPowered by