Old Republic International Corporation (ORI) Earnings

Management highlights

Consolidated Financials - Q2 2026 consolidated pre-tax operating income was $238 million, down from $268 million YoY. Consolidated combined ratio was 95.3%, up from 93.6% YoY. Annualized operating return on beginning equity was 12.1%, and book value per share growth including dividends reached 7.2% for the first half of 2026. - Net operating income was $186 million ($0.76 per share), down from $209 million ($0.83 per share) YoY. Ending book value per share was $25.33. - Net investment income grew over 6% YoY, driven by a larger investment base from strong operating results and May 2026 debt issuance. Total bond portfolio book yield ended the quarter at 4.8%, up slightly from year-end 2025. - $77 million in regular dividends were paid, and $61 million in shares were repurchased, leaving $640 million remaining in the current repurchase program. Specialty Insurance Operational Updates - Rate increases in commercial auto reached the high teens (higher than Q1 2026) and exceeded observed current loss trends; commercial auto loss ratio improved 1 percentage point YoY to 69.4%. - Workers' compensation rates were held flat, with stable severity loss trends and continued declining frequency loss trends, despite top-line pressure from a competitive market. - A $40 million reserve strengthening was recorded for the runoff transactional risk business placed in runoff in 2024, which drove unfavorable prior year reserve development partially offset by favorable development from other specialty lines. Property and commercial auto recorded larger favorable prior year development than last year. - Investments in new specialty operating companies, technology modernization, data analytics, and AI drove the 1.4 percentage point YoY increase in the specialty segment expense ratio. - The recently acquired ECM was integrated, with a planned bargain purchase gain expected in Q3 2026, and ECM is expected to be accretive to 2026 earnings and book value. ECM reported $220 million in 2025 direct premiums written. Title Insurance Operational Updates - Residential transaction volumes improved after a slow seasonal start, and commercial activity remained strong, driving revenue growth. - Direct operations premiums grew 6% YoY, and agency premiums grew 12% YoY. Expense ratio improved 4 percentage points YoY to 92.1%: 2 percentage points of improvement came from a one-time 2025 litigation settlement, with the remainder from operational efficiency efforts, partially offset by higher agent commissions from the larger agency business mix. - Rollout of a new operating system via partnership with Qualia is ongoing, with implementation continuing through the end of 2027 to support long-term margin improvement. Management targets a full-year combined ratio below 95%.

Guidance

- Management maintains that fundamentals for specialty insurance remain strong, and prospects for title insurance continue to brighten for the second half of 2026. - A bargain purchase gain from the ECM acquisition is expected to be reported in Q3 2026, and ECM will be accretive to full-year 2026 earnings and book value. - Title insurance management expects sustained strong commercial segment growth for the remainder of 2026, driven by a broad mix of transaction activity across commercial sub-sectors, and continues to target a full-year combined ratio below 95%. - Management expects continued growth in top-line contribution from newer specialty operating companies, with ECM contributing to both top-line and bottom-line results in the second half of 2026. - Share repurchases will continue opportunistically for the remainder of 2026, with a potential special dividend considered if excess capital remains at year-end.

Segment performance

1. Specialty Insurance: Net premiums earned grew 2.3% year-over-year (YoY), pre-tax operating income was $199 million compared to $254 million YoY. It contributed 78.08% of total pre-tax operating income. The combined ratio was 95.5%, up from 90.7% YoY. Net premiums written grew 1.6% after adjusting for auto warranty retail premium adjustments; commercial auto net premiums written grew 3.6% YoY, while workers' compensation net premiums written fell 8.4% YoY. 2. Title Insurance: Total premium and fee revenue was $773 million, growing 10% YoY (11% YoY growth reported by segment leadership). Pre-tax operating income was $56 million compared to $24 million YoY. It contributed 21.92% of total pre-tax operating income. The combined ratio was 95.1%, improving from 99% YoY. Agency premiums contributed 78% of total title revenue (up from 77% YoY), and commercial premiums contributed 25% of total title premiums earned (up from 23% YoY).

Risks & headwinds

- Intensifying price competition in the broader property and casualty market, particularly for catastrophe-exposed property coverage, creates top-line pressure for specialty insurance lines. - Unfavorable claims experience in the runoff transactional risk specialty line required $40 million in reserve strengthening in Q2 2026, negatively impacting the segment's combined ratio. - General liability and the runoff transactional risk line recorded moderate and material unfavorable prior year loss reserve development respectively, weighing on consolidated results. - Legacy mainframe IT systems require mandatory modernization investments that increase near-term expense ratios, delaying margin improvement. - The Supreme Court's freight broker liability ruling increases liability exposure for brokers, which could lead to increased liability transfer to insured trucking companies that Old Republic insures.

Analyst Q&A

• Q: How are Old Republic's new specialty operating companies (property and ENS) performing amid intensifying industry price competition, especially for property? /

  A: Catastrophe-exposed property, the segment seeing major price cuts, is not a large part of Old Republic's portfolio. The new Old Republic property platform has not begun writing premium yet, with a mandate to build the platform correctly over three years with no incentive to grow premium early, so it is not exposed to current competitive pressure. ENS focuses on non-catastrophic packaged business, so it has maintained stable rates far better than the broader catastrophe-exposed property market.

• Q: What ROI benchmarks does management use for current technology, AI and data analytics investments that are raising the expense ratio? /

  A: Around 1 percentage point of the Q2 2026 expense ratio increase comes from these investments. ROI is already visible at the title business, where AI-enabled modern technology has reduced labor hours per transaction. Modern IT systems are required to support robust data and analytics, which in turn are required to leverage AI; some system modernization is mandatory to replace outdated mainframes. Investments already improve pricing accuracy and claims management, so the ROI of the strategy is clear even without a specific fixed target.

• Q: Why does commercial auto have higher current accident year loss picks alongside favorable prior year reserve development, and what is the reserve strategy? /

  A: Old Republic uses a conservative reserving approach: at the end of 2025, it raised the 2025 accident year loss pick after observing rising severity trends, and carried this conservative approach into 2026 with a higher initial 2026 accident year loss pick. Loss picks are maintained for 2-3 years for commercial auto (longer for other longer-tail lines), and consistent favorable development of prior years indicates the initial conservative picks are aligned with management's target of averaging a couple points of favorable development over time.

• Q: What is the expected underwriting profile of ECM after acquisition? /

  A: ECM has the same 90-95 combined ratio target as all other Old Republic specialty businesses, and it has produced strong combined ratios better than historical levels in the first half of 2026. ECM had an external quota share agreement that reduced its net written premium relative to its $220 million 2025 direct premium; this external agreement was eliminated effective July 1 2026 as ECM is integrated into Old Republic's corporate reinsurance treaties.