SECURITIES AND EXCHANGE COMMISSION
OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2001 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-4625
OLD REPUBLIC INTERNATIONAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware No. 36-2678171
- ------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
307 North Michigan Avenue, Chicago, Illinois 60601
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 312-346-8100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Shares Outstanding
Class March 31, 2001
--------------------------- --------------------
Common Stock / $1 par value 118,553,245
There are 13 pages contained in this report.
2
OLD REPUBLIC INTERNATIONAL CORPORATION
Report on Form 10-Q / March 31, 2001
INDEX
- --------------------------------------------------------------------------------
PAGE NO.
--------
PART I FINANCIAL INFORMATION:
CONSOLIDATED SUMMARY BALANCE SHEETS 3
CONSOLIDATED SUMMARY STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO CONSOLIDATED SUMMARY FINANCIAL STATEMENTS 7 - 9
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS 10 & 11
PART II OTHER INFORMATION 12 & 13
3
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEETS (Unaudited)
($ in Millions)
- ------------------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2001 2000
---------------- ----------------
Assets
Investments: Held to maturity:
Fixed maturity securities (at amortized cost) (fair value: $2,104.1 and $2,106.2) $2,046.1 $2,078.0
Other long-term investments (at cost) 62.0 55.2
---------------- ----------------
Total 2,108.2 2,133.3
---------------- ----------------
Available for sale:
Fixed maturity securities (at fair value) (cost: $2,332.3 and $2,219.2) 2,380.7 2,232.2
Equity securities (at fair value) (cost: $254.8 and $238.7) 284.9 295.5
Short-term investments (at fair value which approximates cost) 339.9 378.0
---------------- ----------------
Total 3,005.6 2,905.8
---------------- ----------------
Total investments 5,113.8 5,039.1
---------------- ----------------
Other Assets: Cash 30.8 33.0
Accrued investment income 70.2 72.0
Accounts and notes receivable 413.5 302.0
Reinsurance balances and funds held 67.8 71.0
Reinsurance recoverable: Paid losses 29.9 36.1
Policy and claim reserves 1,337.2 1,350.4
Deferred policy acquisition costs 163.8 148.1
Sundry assets 225.7 229.4
---------------- ----------------
2,339.2 2,242.2
---------------- ----------------
Total Assets $7,453.0 $7,281.4
================ ================
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities, Preferred Stock and
Common Shareholders' Equity
Liabilities: Future policy benefits $113.1 $120.6
Losses, claims and settlement expenses 3,370.8 3,389.5
Unearned premiums 519.0 397.5
Other policyholders' benefits and funds 46.5 45.7
---------------- ----------------
Total policy liabilities and accruals 4,049.5 3,953.4
Commissions, expenses, fees and taxes 134.9 140.9
Reinsurance balances and funds 117.0 119.2
Federal income tax payable: Current 13.6 5.6
Deferred 314.6 289.8
Debt 229.0 238.0
Sundry liabilities 75.1 94.8
---------------- ----------------
Total liabilities 4,933.9 4,842.0
---------------- ----------------
Preferred
Stock: Convertible preferred stock 0.3 0.7
---------------- ----------------
Common Common stock 121.7 121.4
Shareholders' Additional paid-in capital 212.2 207.8
Equity: Retained earnings 2,173.7 2,106.4
Accumulated other comprehensive income 43.6 35.6
Treasury stock (at cost) (32.6) (32.6)
---------------- ----------------
Total Common Shareholders' Equity 2,518.7 2,438.7
---------------- ----------------
Total Liabilities, Preferred Stock
and Common Shareholders' Equity $7,453.0 $7,281.4
================ ================
See accompanying notes.
4
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED SUMMARY STATEMENTS OF INCOME (Unaudited)
($ in Millions, Except Common Share Data)
- ------------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
March 31,
----------------------------------
2001 2000
---------------- ----------------
Revenues: Net premiums earned $406.3 $380.2
Title, escrow and other fees 49.8 39.0
---------------- ----------------
Sub-total 456.2 419.3
Net investment income 68.4 67.8
Realized investment gains 14.6 0.9
Other income 8.2 5.1
---------------- ----------------
Net revenues 547.5 493.2
---------------- ----------------
Expenses: Benefits, claims and settlement expenses 201.7 198.5
Underwriting, acquisition and
insurance expenses 219.9 211.9
Interest and other expenses 5.2 5.0
---------------- ----------------
Total expenses 426.9 415.4
---------------- ----------------
Income before income taxes and items below 120.6 77.7
---------------- ----------------
Income Taxes: Currently payable 18.2 5.6
Deferred 19.4 17.4
---------------- ----------------
Total income taxes 37.6 23.0
---------------- ----------------
82.9 54.6
Other items - net 1.0 0.6
---------------- ----------------
Net Income: $83.9 $55.3
================ ================
Net Income
Per Share: Basic $0.71 $0.46
================ ================
Diluted $0.70 $0.46
================ ================
Dividends Per
Common Share: Cash dividends $0.14 $0.13
================ ================
Average number of common and common equivalent shares
outstanding:
Basic 118,536,809 120,878,838
================ ================
Diluted 120,150,401 121,196,969
================ ================
See accompanying notes.
5
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
($ in Millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
March 31,
----------------------------------
2001 2000
---------------- ----------------
Net income as reported $83.9 $55.3
---------------- ----------------
Other comprehensive income (loss):
Foreign currency translation adjustment (1.8) (0.3)
---------------- ----------------
Unrealized gains (losses) on securities:
Unrealized gains (losses) arising during period 29.8 (7.6)
Less: elimination of pre-tax realized gains
included in income as reported 14.6 0.9
---------------- ----------------
Pre-tax unrealized gains (losses) on securities
carried at market value 15.2 (8.5)
Deferred income taxes (credits) 5.3 (2.9)
---------------- ----------------
Net unrealized gains (losses) on securities 9.9 (5.5)
---------------- ----------------
Net adjustments 8.0 (5.9)
---------------- ----------------
Comprehensive income $91.9 $49.4
================ ================
See accompanying notes.
6
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
($ in Millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
March 31,
----------------------------------
2001 2000
---------------- ----------------
Cash flows from operating activities:
Net income $83.9 $55.3
Adjustment to reconcile net income to
net cash provided by operating activities:
Deferred policy acquisition costs (15.6) 4.5
Premiums and other receivables 0.7 14.3
Unpaid claims and related items (8.6) (23.0)
Future policy benefits and policyholders' funds 5.1 (8.6)
Income taxes 27.7 21.6
Reinsurance balances and funds 7.3 4.0
Accounts payable, accrued expenses and other (13.0) (7.4)
---------------- ----------------
Total 87.5 60.7
---------------- ----------------
Cash flows from investing activities:
Sales of fixed maturity securities:
Held to maturity:
Maturities and early calls 48.3 58.1
Available for sale:
Maturities and early calls 49.2 25.9
Other 28.3 30.8
Sales of equity securities 22.6 5.9
Sales of other investments 1.1 0.9
Sales of fixed assets for company use 0.4 0.1
Purchases of fixed maturity securities:
Held to maturity (17.1) (2.2)
Available for sale (195.6) (130.2)
Purchases of equity securities (38.7) (41.1)
Purchases of other investments (1.1) (12.1)
Purchases of fixed assets for company use (2.8) (2.9)
Other-net 0.7 (5.5)
---------------- ----------------
Total (104.6) (72.4)
---------------- ----------------
Cash flows from financing activities:
Increase in term loans --- 47.0
Issuance of preferred and common stocks 3.3 1.4
Repayments of term loans (9.0) ---
Redemption of debentures and notes (0.2) (0.5)
Dividends on common shares (16.5) (15.5)
Dividends on preferred shares --- ---
Purchase of treasury stock --- (43.8)
Other-net (0.6) ---
---------------- ----------------
Total (23.1) (11.4)
---------------- ----------------
Increase (decrease) in cash and short-term investments (40.2) (23.0)
Cash and short-term investments, beginning of period 411.0 294.1
---------------- ----------------
Cash and short-term investments, end of period $370.8 $271.1
================ ================
Supplemental disclosure of cash flow information:
Cash paid during the period for: Interest $1.8 $1.7
================ ================
Income taxes $9.3 $1.9
================ ================
See accompanying notes.
7
OLD REPUBLIC INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED SUMMARY FINANCIAL STATEMENTS (Unaudited)
($ in Millions, Except Share Data)
- --------------------------------------------------------------------------------
1. Accounting Policies and Basis of Presentation:
The accompanying consolidated summary financial statements have been
prepared in conformity with generally accepted accounting principles as
described in the Corporation's latest annual report to shareholders or as
disclosed herein. The financial accounting and reporting process relies on
estimates and on the exercise of judgement, but in the opinion of management
all adjustments, consisting of normal recurring accruals, necessary to a
fair presentation of the accompanying statements have been reflected
therein. Realized gains or losses on dispositions of investment securities
have been reflected in the operating results for each period presented.
2. Common Share Data:
Common share data has been retroactively adjusted to reflect all stock
dividends and splits. The following table provides a reconciliation of the
income before extraordinary items and number of shares used in basic and
diluted earnings per share calculations.
Quarters Ended March 31,
-------------------------------
2001 2000
-------------- --------------
Numerator:
Income before extraordinary item......................................... $ 83.9 $ 55.3
Less Preferred stock dividends........................................... -- --
-------------- --------------
Numerator for basic earnings per share -
income available to common stockholders............................... 83.9 55.3
Effect of dilutive securities:
Convertible preferred stock dividends.................................... -- --
-------------- --------------
Numerator for diluted earnings per share -
income available to common stockholders
after assumed conversions................................................ $ 83.9 $ 55.3
============== ==============
Denominator:
Denominator for basic earnings per share -
weighted-average shares............................................... 118,536,809 120,878,838
Effect of dilutive securities:
Stock options............................................................ 1,565,959 181,595
Convertible preferred stock.............................................. 47,633 136,536
-------------- --------------
Dilutive potential common shares......................................... 1,613,592 318,131
-------------- --------------
Denominator for diluted earnings per share -
adjusted weighted-average shares and
assumed conversions...................................................... 120,150,401 121,196,969
============== ==============
Basic earnings per share.................................................... $ 0.71 $ 0.46
============== ==============
Diluted earnings per share.................................................. $ 0.70 $ 0.46
============== ==============
3. Unrealized Appreciation of Investments:
Cumulative net unrealized gains on fixed maturity securities available for
sale and equity securities credited to a separate account in common
shareholders' equity amounted to $55.1 at March 31, 2001. Unrealized
appreciation of investments, before applicable deferred income taxes of
$29.8, at March 31, 2001 included gross unrealized gains and (losses) of
$131.6 and $(46.6), respectively.
For the quarters ended March 31, 2001 and 2000, net unrealized appreciation
(depreciation) of investments, net of deferred income taxes (credits),
amounted to $9.9 and ($5.5), respectively.
8
4. Information About Segments of Business
The Corporation's business segments are organized as the General Insurance
(property and liability insurance), Mortgage Guaranty, Title Insurance and
Life Insurance Groups. The contributions of Old Republic's insurance
industry segments to consolidated revenues and operating results, and
certain balance sheet data pertaining thereto are shown in the following
tables on the basis of generally accepted accounting principles ("GAAP").
Each of the Corporation's segments underwrites and services only those
insurance coverages which may be written by it pursuant to state insurance
regulations and corporate charter provisions.
Segment Reporting
- -------------------------------------------------------------------------------------------------------------------
Quarters Ended March 31,
-------------------------------
2001 2000
------------- --------------
General Insurance Group:
Net premiums earned...................................................... $ 231.9 $ 210.7
Net investment income and other income(a)................................ 49.1 49.0
------------- --------------
Total................................................................. $ 281.1 $ 259.8
============= ==============
Income before taxes...................................................... $ 35.2 $ 21.8
============= ==============
Income tax expense....................................................... $ 8.5 $ 4.4
============= ==============
Mortgage Guaranty Group:
Net premiums earned...................................................... $ 86.3 $ 81.2
Net investment income and other income(a)................................ 19.0 14.4
------------- --------------
Total................................................................. $ 105.4 $ 95.7
============= ==============
Income before taxes...................................................... $ 61.5 $ 52.7
============= ==============
Income tax expense....................................................... $ 20.8 $ 17.6
============= ==============
Title Insurance Group:
Net premiums earned...................................................... $ 73.7 $ 72.4
Title, escrow and other fees ........................................... 49.8 39.0
------------- --------------
Sub-total............................................................. 123.6 111.4
Net investment income and other income(a)................................ 5.8 6.1
------------- --------------
Total................................................................. $ 129.4 $ 117.5
============= ==============
Income before taxes...................................................... $ 10.9 $ 3.2
============= ==============
Income tax expense....................................................... $ 3.7 $ 0.9
============= ==============
Life Insurance Group:
Net premiums earned...................................................... $ 14.2 $ 15.8
Net investment income and other income(a)................................ 2.0 2.1
------------- --------------
Total................................................................. $ 16.3 $ 18.0
============= ==============
Income before taxes...................................................... $ 1.5 $ 0.9
============= ==============
Income tax expense....................................................... $ 0.5 $ 0.3
============= ==============
9
Reconciliations of Segments to Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
Quarters Ended March 31,
-------------------------------
2001 2000
------------- --------------
Revenues:
Total revenues for reportable segments................................... $ 532.3 $ 491.1
Net realized investment gains............................................ 14.6 0.9
Other revenues........................................................... 3.8 4.7
Elimination of intersegment revenues(b).................................. (3.2) (3.5)
------------- --------------
Total consolidated revenues........................................... $ 547.5 $ 493.2
============= ==============
Income before taxes:
Total income before taxes of reportable segments......................... $ 109.3 $ 78.7
Net realized investment gains............................................ 14.6 0.9
Other sources - net...................................................... (3.2) (1.8)
------------- --------------
Income before income taxes and
extraordinary items................................................... $ 120.6 $ 77.7
============= ==============
- ---------
In the above tables, net premiums earned on a GAAP basis differ slightly
from statutory amounts due to certain differences in calculations of
unearned premium reserves under each accounting method.
(a) Including unallocated investment income derived from invested capital
and surplus funds./(b) Represents results of holding company parent,
consolidation eliminating adjustments, and general corporate expenses, as
applicable.
5. Legal Proceedings
Legal proceedings against the Company arise in the normal course of business
and generally pertain to claim matters related to insurance policies and
contracts issued by the Corporation's insurance subsidiaries.
The Federal Department of Labor has revised the Federal Black Lung Program
regulations effective January 19, 2001. These new regulations, which might
require a re-evaluation of previously settled or denied workers'
compensation claims, are being challenged in court by the insurance and coal
mining industries. At this time, the outcome of this challenge is uncertain
and the potential impact on gross and net of reinsurance reserves or
retrospective rating policies due to the revised regulations is not
measurable.
In December 1999, a class action lawsuit was filed against one of the
Company's mortgage guaranty insurance subsidiaries in the Federal District
Court for the Southern District of Georgia. The suit alleges that the
subsidiary provided pool insurance and other services to mortgage lenders at
preferential, below market prices in return for mortgage insurance business,
and that such practices violated the Real Estate Settlement Procedures Act.
The Court ruled in favor of a summary judgement motion filed by the
Company's subsidiary and dismissed the law suit. The class plaintiffs have
appealed and the appeal is currently before the U.S. Court of Appeals for
the Eleventh Circuit. The ultimate outcome of this litigation is unknown at
the present time. Accordingly, no provision for any liability, including the
additional cost of defense, has been included in the Company's financial
statements.
The City and County of San Francisco and certain escrow customers of an
underwritten title agency subsidiary headquartered in the State of
California have filed law suits alleging that the subsidiary: 1) failed to
escheat unclaimed escrow funds; 2) charged for services not necessarily
provided; and 3) collected illegal interest payments or fees from banks on
the basis of funds held for escrow customers. The subsidiary has in turn
conducted an internal review of its records and concluded that it had
certain liabilities for part of the issues denoted at (1) and (2).
Management believes that the alleged practices denoted at (3) are common
within the industry, are not in conflict with various laws and regulations,
and that it has meritorious defenses which will ultimately lead to a
successful resolution of these practices. Through March 31, 2001, as the
litigation has progressed on several fronts and additional information has
come to its attention, the subsidiary has continually re-evaluated its
exposures and it has paid or otherwise provided cumulatively $41.0 million
since mid-1998 as its best estimate of litigation and related costs
associated with all these issues.
In mid October, 2000, the California Department of Insurance (CDI) filed a
complaint against the above referenced subsidiary. The complaint alleges
violations of certain sections of the Insurance Code that prohibit any form
of considerations to induce the referral of business to a title company. The
CDI is seeking a maximum monetary penalty of $3.8 million. The Company
believes it has meritorious defenses to the allegations and that its overall
claim and other expense accruals are sufficient to cover these and other
known exposures.
10
OLD REPUBLIC INTERNATIONAL CORPORATION
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS
Quarters Ended March 31, 2001 and 2000
- --------------------------------------------------------------------------------
OVERVIEW
This analysis pertains to the consolidated accounts of Old Republic
International Corporation. The Company conducts its business through four major
segments, namely its General (property and liability coverages), Mortgage
Guaranty, Title, and Life insurance groups.
FINANCIAL POSITION
Old Republic's financial position at March 31, 2001 reflected increases in
assets, liabilities and common shareholders' equity when compared to the
immediately preceding year-end of 2.4%, 1.9% and 3.3%, respectively. Cash and
invested assets represented 70.0% and 70.6% of consolidated assets as of March
31, 2001 and December 31, 2000, respectively. Consolidated operating cash flow
was positive at $87.5 million in the latest quarter, compared to $60.7 million
in the same period of 2000.
Relatively high short-term maturity investment positions continued to be
maintained as of March 31, 2001 to provide necessary liquidity for specific
operating needs and to enhance flexibility in investment strategy. Changes in
short-term investments reflect a large variety of seasonal and intermediate-term
factors including expected operating cash flows and investment strategy.
Accordingly, the future level of short-term investments will vary and respond to
the interplay of these factors and may, as a result, increase or decrease from
current levels. During the first quarter of 2001, the Corporation committed
substantially all investable funds in short to intermediate-term fixed maturity
securities. Old Republic continues to adhere to its long-term policy of
investing primarily in investment grade, marketable securities; investable funds
have not been directed to so-called "junk bonds" or types of securities
categorized as derivatives. During the first quarter of 2001, Old Republic's
investment in equity securities decreased slightly in relation to the related
invested balance at year-end 2000. At March 31, 2001, the carrying value of bond
and note investments in default as to principal and/or interest was immaterial
in relation to consolidated assets or shareholders' equity.
The parent holding company has met its liquidity and capital needs principally
through dividends paid by its subsidiaries. The insurance subsidiaries' ability
to pay cash dividends to the parent company is generally restricted by law or
subject to approval of the insurance regulatory authorities of the states in
which they are domiciled.
Old Republic's capitalization of $2.74 billion at March 31, 2001 consisted of
debt of $229.0 million, convertible preferred stock of $0.3 million, and common
shareholders' equity of $2.51 billion. The increase in the common shareholders'
equity account during the quarter ended March 31, 2001 reflects primarily the
retention of earnings in excess of dividend requirements and a moderate increase
in the value of bonds and stocks carried at market value.
RESULTS OF OPERATIONS
Revenues:
Consolidated net premiums and fees earned in the first quarter of 2001 amounted
to $456.2 million versus $419.3 million in the year ago period. For the first
three months of 2001, the Company's General Insurance Group reported earned
premium volume of $231.9 million, up 10.1% from $210.7 million a year ago. The
Company believes that this positive trend reflects the pricing and risk
selection improvements it has been effecting for the past two years or so.
Premiums for the Mortgage Guaranty Group increased by 6.3% to $86.3 million from
$81.2 million in the year-ago quarter; in-force business persistency was
reasonably stable in this year's first quarter. Title Group premium and fee
revenues increased 10.9% to $123.6 million in the first quarter of 2001 when
compared to the same quarter of 2000 as a result of higher mortgage financing
and refinancing activity. Life Group premium volume decreased to $14.2 million,
a 9.9% decline when compared to the same quarter of 2000.
Consolidated net investment income of $68.4 million in the first quarter of 2001
was up slightly when compared to the preceding year due to a slightly higher
invested asset base. The average annualized yield on investments was
approximately 5.4% and 5.7% at the end of March 31, 2001 and 2000, respectively.
Yield trends reflect at once the relatively short maturity of Old Republic's
fixed maturity securities portfolio, and declining yields during most of the
first quarter of 2001.
The Company's investment policies have not been designed to maximize realized
investment gains. Realized gains of $14.6 million in the first quarter of 2001,
compared to $0.9 million in the prior year quarter, were mostly due to the sale
of equity securities. Dispositions of securities are primarily the result of
scheduled maturities of bonds and notes as well as sales of equity securities.
For the first quarter of 2001, 77.5% of total dispositions represented
maturities and early calls of bond and note holdings; for the year ago period in
2000, these transactions amounted to 73.2% of the total dispositions.
11
Expenses:
Consolidated benefit, claim and settlement costs, as a percentage of net
premiums and fees earned, were approximately 44% and 47% in the first quarters
of 2001 and 2000, respectively. Consolidated claims ratio for property and
liability coverages was affected positively by the previously mentioned increase
in premiums earned. Mortgage Guaranty claim costs were slightly lower during the
first quarter of 2001 vis-a-vis the same period in 2000 due mostly to stable
economic and employment conditions which usually lead to reduced mortgage
defaults. Title claims costs were up moderately in 2001, while Life Group claim
costs were lower in the latest quarter.
The ratio of consolidated underwriting, acquisition and insurance expenses to
net premiums and fees earned was approximately 48% and 51% in the first quarters
of 2001 and 2000, respectively. Variations in these ratios reflect a continually
changing mix of coverages sold and attendant costs of producing business. The
property and liability segment's expense ratio declined due to a greater
increase in premium revenues than operating expenses. The Mortgage Guaranty
segment's expense ratio declined moderately. The insurance expense ratio for the
title segment was lower in the first quarter of 2001 compared to the same period
in 2000 due in part to an increase in premium and fees volume without a
proportional increase in expenses. Consolidated interest and other charges were
approximately the same in the current quarter versus the same period a year ago.
Pre-Tax and Net Income:
Consolidated income before taxes increased by 55.1% in the first quarter of 2001
when compared to the same period one year ago. The positive effect of the
General Insurance Group's turnaround was accentuated by favorable year-over-year
comparisons for the Company's Mortgage Guaranty and Title Insurance Groups.
The effective consolidated income tax rate was 31.3% and 29.7% in the first
quarters of 2001 and 2000, respectively. The rates for each period reflect
primarily the varying proportions of pre-tax operating income derived from
tax-sheltered investment income (principally tax-exempt interest) on the one
hand, and fully taxable investment and underwriting/service income on the other
hand.
OTHER INFORMATION
Reference is here made to "Financial Information Relating to Segments of
Business" appearing elsewhere herein.
Historical data pertaining to the operating performance, liquidity, and other
financial matters applicable to an insurance enterprise such as Old Republic are
not necessarily indicative of results to be achieved in succeeding years. In
addition to the factors cited below, the long-term nature of the insurance
business, seasonal and annual patterns in premium production and incidence of
claims, changes in yields obtained on invested assets, changes in government
policies and free markets affecting inflation rates and general economic
conditions, and changes in legal precedents or the application of law affecting
the settlement of disputed claims can have a bearing on period-to-period
comparisons and future operating results.
Any forward-looking commentary or inferences contained in this report involve,
of necessity, assumptions, uncertainties, and risks that may affect the
Company's future performance. With regard to Old Republic's General Insurance
segment, its results can be affected in particular by the level of market
competition which is typically a function of available capital and expected
returns on such capital among competitors, the levels of interest and inflation
rates, as well as periodic changes in claim frequency and severity patterns
caused by natural disasters, weather conditions, accidents, illnesses,
work-related injuries, and unanticipated external events. Mortgage Guaranty and
Title insurance results can be affected by such factors as changes in national
and regional housing demand and values, the availability and cost of mortgage
loans, employment trends, and default rates on mortgage loans; mortgage guaranty
results may also be affected by various risk-sharing arrangements with business
producers as well as the risk management and pricing policies of government
sponsored enterprises. Life and disability insurance results can be impacted by
the levels of employment and consumer spending, as well as mortality and health
trends. At the holding company level, operating earnings or losses are generally
affected by the amount of debt outstanding and its cost, as well as interest
income on temporary holdings of short-term investments.
Any forward-looking commentaries speak only as of their dates. Old Republic
undertakes no obligation to publicly update or revise such comments, whether as
a result of new information, future events or otherwise, and accordingly they
may not be unduly relied upon.
12
OLD REPUBLIC INTERNATIONAL CORPORATION
FORM 10 - Q
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 6 - Reports on Form 8-K
- ----------------------------
(a) Reports on Form 8-K
1. The registrant has not filed any reports on Form 8-K during the quarter
for which this report is filed.
Items other than those listed are omitted because they are not required.
13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Old Republic International Corporation
--------------------------------------
(Registrant)
Date: May 10, 2001
--------------
/s/ Paul D. Adams
--------------------------------------
P. D. Adams
Senior Vice President &
Chief Financial Officer