OLD REPUBLIC INTERNATIONAL CORP Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Consolidated pretax operating income in Q3 2024 was $229 million, down from $251 million in 2023. Combined ratio was 95% vs. 92% last year.
• General Insurance had strong underwriting results but lower favorable prior-year loss reserve development than 2023. E&S premiums growth driven by subsidiaries like Old Republic E&S. Property catastrophic losses expected ultimate losses: Helene $8-10M, Milton $18-23M. Financial indemnity had unfavorable development of $25M.
• Title Insurance impacted by high mortgage rates and tight real estate market but seeing signs of transition. Direct new open residential title orders up 26% Y/Y. Focus on modernization and technology investment.
• Returned capital to shareholders via dividends and share repurchases. Share repurchases in Q3: $165 million, since end of quarter $23 million more, remaining $385 million in program. Retained earnings filling capital bucket, considering growth opportunities and M&A.

Segment Performance

• General Insurance: Produced $197 million of pretax operating income in Q3 2024, down from $216 million in 2023. Combined ratio was 94% in Q3 vs. 89% last year. Net written premiums up 16% with strong renewal retentions, rate increases, new business growth, and E&S premiums up 21% (trailing 12-month run rate $585 million). Loss ratio for Q3 was 65.2% including 1.7 points of favorable prior-year loss reserve development. Year-to-date pretax operating income $620 million, combined ratio 92.3%.
• Title Insurance: Premium and fee revenue $709 million in Q3, up nearly 4% from Q3 2023. Directly produced premium and fees 22% of revenue vs. 21% in 2023. Fees up 9%, agency-produced premiums up 2%. Commercial premiums down 6% but direct new title orders up 11%. Pretax operating income $40 million, up 7% from prior year. Combined ratio 96.7%, consistent with Q3 2023.

Guidance

• General Insurance: Expect solid growth and profitability for remainder of 2024 due to specialty strategy, operational excellence, and new subsidiaries.
• Title Insurance: Focus on modernization and technology, expecting recovery as real estate market improves, with Q3 new open residential title orders up 26% Y/Y.

Risks

• General Insurance: Unfavorable prior-year loss reserve development in financial indemnity line (transactional risks). Property catastrophic losses impact.
• Title Insurance: Headwinds from housing affordability and lack of residential inventory; market recovery still in progress.

Question and Answer

Q: Comments on share repurchase activity and E&S growth A: Share repurchases in Q3 were $165M, since end of quarter $23M more, remaining $385M. E&S premiums up 21%, driven by subsidiaries like Old Republic E&S.

Q: Reserve development and financial lines A: Target of ~2% favorable reserve development; $25M unfavorable development in financial lines (transactional risks) was a one-time situation with conservative reserving, but monitored going forward.

Q: Commercial auto and capital management A: Commercial auto rate increases ~10% in line with loss cost trend; capital management includes reviewing excess capital with Board, preferring growth but retained earnings filling capital bucket.

Q: Home warranty and expense ratio A: Auto warranty driving growth in home/auto warranty; Home warranty down due to real estate cycle, expense ratio impacted by upfront expenses and technology modernization.