NEWS BULLETIN
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Old Republic International Corporation
307 North Michigan Avenue, Chicago, IL 60601-5382 312/346-8100
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For Further Information:
AT OLD REPUBLIC: AT FRB | WEBER SHANDWICK:
Al Zucaro George Zagoudis
Chairman & CEO General Information
(312) 346-8100 (312) 640-6663
gzagoudis@webershandwick.com
AT FRB | WEBER SHANDWICK: AT FRB | WEBER SHANDWICK:
Leslie Loyet Tim Grace
Analysts/Investors Media Inquiries
(312) 640-6672 (312) 640-6667
lloyet@webershandwick.com tgrace@webershandwick.com
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FOR IMMEDIATE RELEASE NYSE: ORI
THURSDAY, APRIL 24, 2003
OLD REPUBLIC ANNOUNCES RECORD
QUARTERLY OPERATING EARNINGS
------------------------
Each Major Business Segment Contributes to Earnings Growth
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Financial Highlights
(unaudited; amounts in millions except share data and
percentages; all per-share amounts are stated on a diluted basis)
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Quarters Ended March 31,
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2003 2002 Change
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Total Revenues $739.0 $639.0 15.6%
Net Operating Income (*) $108.7 $ 89.3 21.8%
Net Income (*) $104.3 $ 95.5 9.2%
Diluted Earnings Per Share:
Net Operating Income (*) $ 0.90 $ 0.74 21.6%
Net Income (*) $ 0.86 $ 0.79 8.9%
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Chicago - April 24, 2003 - Old Republic International Corporation (NYSE: ORI),
today announced that net operating earnings grew by 21.6 percent per share in
this year's first quarter. The largest improvements stemmed from the Company's
general insurance business, which posted pretax operating earnings growth of
48.0 percent, and its title services line, whose pretax operating earnings rose
by 28.0 percent. Consolidated results were also aided by additional growth in
Old Republic's mortgage guaranty business, its single largest earnings
contributor.
Old Republic International Corporation
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Old Republic's consolidated net operating earnings amounted to $108.7 million,
or 90 cents per share, for the first quarter of 2003, versus $89.3 million, or
74 cents per share, up 21.6 percent from the same period in 2002. First quarter
net income increased 9.2 percent to $104.3 million, or 86 cents per share,
compared to $95.5 million, or 79 cents per share, in last year's first quarter.
Post tax net realized investment losses amounted to $4.3 million, or 4 cents per
share in the first quarter compared to post tax net realized investment gains of
$6.2 million, or 5 cents per share in the same period of 2002.
(*) GAAP net income includes post tax realized gains (losses), whereas net
operating income is exclusive of such items. Both figures are given to aid
investor analysis of Company results and to highlight the impact of certain
accounting rules or securities market-driven considerations that affect the
recording of investment gains or losses and can contribute to earnings
volatility and lessened period-to-period comparability. The realization of
investment gains or losses can be highly discretionary due to such factors as
the timing of individual securities sales, tax-planning considerations, and
investment management judgments relative to the direction of securities markets
or the future prospects of individual issues or industry sectors. The
recognition of losses from write-downs of securities deemed other than
temporarily impaired can be caused by a variety of factors, including adverse
securities market trends and industry-wide or issuer-specific developments that
can lead to a permanent loss of market value or non-recoverability of asset
value. Pretax realized losses of $6.7 million in the first three months of 2003
and pretax realized gains of $9.7 million in the first three months of 2002
include write-downs of $9.5 million and $9.0 million, respectively, applicable
to investment securities deemed to have become other than temporarily impaired
at the end of each period.
Consolidated Revenues
Consolidated operating revenues in the first quarter totaled $745.8 million, up
18.5 percent from $629.3 million in the same period of 2002. Net premiums and
fees earned were $663.6 million in the latest quarter versus $551.6 million in
the year-ago period. Consolidated net investment income of $69.4 million for the
first three months of 2003 was up slightly when compared to the preceding year
due to the continuation of a lower yield environment which partially offset
growth in the Company's invested asset base.
General Insurance Group
Old Republic's General Insurance Group, which underwrites property and liability
insurance coverages, reported a 48.0 percent increase in pretax operating income
to $59.4 million for this year's first quarter. This compares to $40.1 million
earned during the same period in 2002. Net premiums earned in the first quarter
of 2003 were $313.9 million, up 16.8 percent from $268.7 million a year ago. The
composite underwriting ratio for the first three months of 2003 reflected a
decline of 5.3 percentage points to 94.8 percent when compared to 100.1 percent
posted in the first quarter of 2002, and 98.4 percent for all of 2002. The
positive underwriting trends are attributable to the steadily improving pricing
and risk selection standards that have been applied in the past three years, as
well as reduced claim frequency and severity in the latest quarter in most parts
of Old Republic's business.
Mortgage Guaranty Group
Old Republic's Mortgage Guaranty Group posted pretax operating earnings growth
of 7.9 percent to $75.9 million in this year's first quarter. This compares to
$70.3 million earned in the same quarter of 2002. Net premium revenues in the
most recent quarter were $100.0 million, up 9.2 percent from $91.6 million in
the year-ago quarter. The composite underwriting ratio in the first three months
of 2003 was 40.5 percent compared to 41.0 percent in the same quarter of 2002.
Trends in loan default rates and claim severity remained relatively stable
during the first quarter thus reducing pressure on claim cost provisions.
Investment income was relatively flat year over year.
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Title Insurance Group
In this year's first quarter, Old Republic's Title business registered a 32.4
percent increase in premium and fee revenues versus the first quarter of 2002.
Pretax operating results in this segment continue to be affected favorably by
strong revenue growth, relatively low claim costs, and good controls on
operating expenses. The composite underwriting ratio was 91.5 percent in the
first quarter of 2003, up marginally from 91.4 percent in the same period of
2002.
Life and Health Group
Earnings for the Company's Life and Health Group, its smallest segment, were
slightly lower in this year's first quarterly period. Reduced benefits and
claims costs were offset by greater production and operating expenses.
Cash, Invested Assets and Shareholders' Equity
Cash and invested assets at March 31, 2003, totaled $6.40 billion, or $53.13 per
share, compared to $6.16 billion, or $51.15 per share, at December 31, 2002, and
$5.70 billion, or $47.40 per share, at March 31, 2002.
Effective January 1, 2003, the Corporation elected to reclassify its fixed
maturity securities categorized as held to maturity to the available for sale
classification. The securities involved are primarily utility and tax-exempt
bonds that account for approximately 34 percent of Old Republic's investment
portfolio. The decision was prompted by restrictive accounting rules affecting
held to maturity investment securities. The necessarily mechanical application
of these rules can inhibit the Corporation's ability to optimally manage its
investments from a practical business point of view. As of March 31, 2003 the
net impact of this reclassification on the Corporation's balance sheet is to
increase the carrying value of invested assets by $119.4 million, deferred tax
liabilities by $41.8 million, and shareholders equity by $77.6 million, or
approximately 64 cents per share. This change has no income statement impact, no
effect on Old Republic's ability or intent to hold individual securities to
maturity as it may deem appropriate, and does not affect the Company's necessary
long-term orientation in the management of its business. Going forward, Old
Republic's shareholders' equity account determined on the basis of generally
accepted accounting principles could, as a result, reflect somewhat greater
period to period volatility as the entire bond, note and stock investment
portfolio will be marked to market on a quarterly basis.
The investment portfolio reflects a current allocation of approximately 86
percent in fixed-maturity securities and 7 percent in equities. As in the past,
it contains little or no exposure to real estate investments, mortgage-backed
securities, derivatives, junk bonds, private placements or mortgage loans.
Consolidated operating cash flow continued to be positive in the latest quarter,
growing by 31.2 percent to $196.4 million.
Common shareholders' equity was $3.30 billion at March 31, 2003, compared to
$3.15 billion at December 31, 2002, and $2.87 billion at March 31, 2002. Book
value per share was $27.39 at the end of March 2003, versus $26.17 at year-end
2002 and $23.90 at March 31, 2002. The latest quarter's change in book value
reflects principally the retention of earnings in excess of dividend
requirements, and an increase in the value of bonds and stocks carried at market
values.
Conference Call Information
Old Republic has scheduled a conference call at 2:00 p.m. Central Daylight
Savings Time today to discuss its first quarter 2003 performance and review
ongoing trends. To access this call, log on to www.oldrepublic.com 15 minutes
before the call to download the necessary software. Replays will be available
through this website for 30 days.
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Old Republic International Corporation
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About Old Republic
Chicago-based Old Republic International Corporation is an insurance holding
company whose subsidiaries market, underwrite and provide risk management
services for a wide variety of coverages in the property and liability, mortgage
guaranty, title and life and health insurance fields. One of the nation's 50
largest publicly owned insurance organizations, Old Republic has assets of
approximately $9.00 billion and capitalization of $3.44 billion. Its current
stock market valuation is approximately $3.63 billion.
Safe Harbor Statement
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.
Some of the statements made in this News Release and Company published reports,
as well as oral statements or commentaries made by the Company's officials in
conference calls following earnings releases, can constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Any forward-looking statements, commentaries, or inferences therefrom
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, and 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 similar factors and most particularly by
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 parent 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 statements or commentaries speak only as of their dates. Old
Republic undertakes no obligation to publicly update or revise all such
comments, whether as a result of new information, future events or otherwise,
and accordingly they may not be unduly relied upon.
For the latest news releases and other corporate documents
on Old Republic International
visit: www.oldrepublic.com
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Financial Tables Follow ...
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Old Republic International Corporation
FINANCIAL HIGHLIGHTS
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Quarters Ended
March 31,
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2003 2002 Change
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<s> <c> <c> <c>
NET INCOME:
Total $104,385,618 $95,554,720 9.2%
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Per Share:Basic $0.86 $0.79 8.9%
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Diluted $0.86 $0.79 8.9%
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Average number of common and
equivalent shares outstanding
Basic 120,621,469 120,226,110
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Diluted 121,323,860 121,323,388
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COMPOSITION OF EARNINGS PER SHARE:
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Basic Earnings:
Net income, before items below $0.90 $0.74 21.6%
Realized investment gains (losses) (0.04) 0.05
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Net income $0.86 $0.79 8.9%
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Diluted Earnings:
Net income, before items below $0.90 $0.74 21.6%
Realized investment gains (losses) (0.04) 0.05
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Net income $0.86 $0.79 8.9%
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BOOK VALUE PER SHARE (End of periods)(a):
As Reported $27.39 $23.90 14.6%
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Cost Basis $25.89 $23.16 11.8%
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FINANCIAL SUMMARY ($ in Millions) :
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Operating Revenues:
General $361.8 $316.3 14.4%
Mortgage Guaranty 124.8 113.4 10.0%
Title 239.6 182.2 31.5%
Life & Health 17.7 16.6 6.8%
Other 1.7 0.5
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Consolidated Operating Revenues 745.8 629.3 18.5%
Realized Investment Gains (Losses) (6.7) 9.7
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Total Revenues $739.0 $639.0 15.6%
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Pretax Operating Income (Loss):
General $59.4 $40.1 48.0%
Mortgage Guaranty 75.9 70.3 7.9%
Title 25.7 20.1 28.0%
Life & Health 1.3 1.6 -20.1%
Other (1.9) (1.9)
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Total 160.5 130.3 23.1%
Realized Investment Gains (Losses) (6.7) 9.7
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Revenues, Net of Expenses 153.8 140.1 9.8%
Income Taxes 49.4 44.5 11.0%
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Net Income $104.3 $95.5 9.2%
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(a) "As Reported" in financial statements with all securities carried at market
value at March 31, 2003, and partially so at March 31, 2002.
"Cost Basis" calculation includes all investment securities at their
currently amortized original cost.
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Old Republic International Corporation
SEGMENTED SUMMARY INFORMATION
($ in Millions)
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Net Pretax
Premiums Net Sales Operating Composite
& Fees Investment Other Operating Benefits & Other Total Income Underwriting
Segment Earned Income Income Revenues & Claims Expenses Expenses (Loss) Ratios
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<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Quarter Ended March 31, 2003
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General $313.9 $43.6 $4.2 $361.8 $213.5 $88.8 $302.3 $59.4 94.8%
Mortgage 100.0 16.4 8.3 124.8 15.2 33.6 48.8 75.9 40.5%
Title 233.6 5.8 0.1 239.6 12.9 200.9 213.8 25.7 91.5%
Life 16.0 1.6 --- 17.7 7.8 8.5 16.4 1.3 102.2%
Other --- 1.7 --- 1.7 --- 3.6 3.6 (1.9) ---
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Consolidated $663.6 $69.4 $12.7 $745.8 $249.5 $335.6 $585.2 $160.5 85.7%
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Quarter Ended March 31, 2002
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General $268.7 $42.7 $4.9 $316.3 $197.1 $79.0 $276.2 $40.1 100.1%
Mortgage 91.6 16.3 5.4 113.4 11.4 31.6 43.0 70.3 41.0%
Title 176.5 5.5 0.1 182.2 8.3 153.8 162.1 20.1 91.4%
Life 14.8 1.7 --- 16.6 8.0 6.9 14.9 1.6 100.8%
Other --- 0.5 --- 0.5 --- 2.5 2.5 (1.9) ---
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Consolidated $551.6 $67.0 $10.5 $629.3 $224.9 $273.9 $498.9 $130.3 87.8%
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Fiscal Year Ended March 31, 2003
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General $1,229.3 $173.4 $19.3 $1,422.1 $868.4 $352.1 $1,220.6 $201.4 97.2%
Mortgage 384.7 65.9 27.8 478.5 56.7 148.4 205.1 273.3 46.1%
Title 870.5 22.8 0.5 893.9 45.3 745.1 790.4 103.4 90.7%
Life 51.3 6.6 0.2 58.2 28.9 23.1 52.0 6.1 101.0%
Other --- 6.1 --- 6.2 --- 13.3 13.3 (7.1) ---
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Consolidated $2,535.9 $275.0 $48.0 $2,858.9 $999.5 $1,282.2 $2,281.8 $577.1 87.5%
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Fiscal Year Ended March 31, 2002
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General $1,037.0 $173.8 $19.3 $1,230.3 $772.3 $311.6 $1,083.9 $146.3 101.2%
Mortgage 358.4 64.2 21.3 444.0 52.0 121.2 173.2 270.8 43.6%
Title 678.2 22.6 0.8 701.7 28.7 589.1 617.9 83.8 90.6%
Life 51.2 7.3 0.1 58.7 30.5 23.1 53.7 5.0 104.5%
Other --- 5.1 --- 5.1 --- 12.6 12.6 (7.4) ---
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Consolidated $2,124.9 $273.3 $41.7 $2,440.1 $883.7 $1,057.7 $1,941.5 $498.5 88.3%
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Old Republic International Corporation
OPERATING STATISTICS
($ in Millions)
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Quarters Ended
March 31,
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2003 2002
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General Insurance Group:
Benefits and claims ratio 69.2% 74.5%
Expense ratio 25.6% 25.6%
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Composite ratio 94.8% 100.1%
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Paid loss ratio 54.9% 64.6%
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Mortgage Guaranty Group:
New insurance written:Primary $10,195.7 $7,033.5
Pool 1,522.2 1,428.4
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Total $11,717.9 $8,461.9
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Net insurance in force $114,421.7 $99,749.2
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Net risk in force $16,162.2 $15,621.7
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Earned premiums ceded to captives $15.7 $12.7
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Persistency 55.0% 62.4%
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Delinquency ratio 3.30% 2.60%
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Claims ratio 15.2% 12.5%
Expense ratio 25.3% 28.5%
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Composite ratio 40.5% 41.0%
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Paid loss ratio 16.5% 14.0%
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Title Insurance Group:
Direct orders opened 141,335 92,416
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Direct orders closed 108,730 85,574
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Claims ratio 5.5% 4.7%
Expense ratio 86.0% 86.7%
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Composite ratio 91.5% 91.4%
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Paid loss ratio 2.4% 4.6%
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