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 FINANCIAL RELATIONS BOARD:
A.C. Zucaro George Zagoudis
Chairman & CEO General Information
(312) 346-8100 (312) 640-6663
gzagoudis@financialrelationsboard.com
AT FINANCIAL RELATIONS BOARD: AT FINANCIAL RELATIONS BOARD:
Leslie Loyet Tim Grace
Analysts/Investors Media Inquiries
(312) 640-6672 (312) 640-6667
lloyet@financialrelationsboard.com tgrace@financialrelationsboard.com
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FOR IMMEDIATE RELEASE NYSE: ORI
THURSDAY, APRIL 28, 2005
OLD REPUBLIC REPORTS DOUBLE-DIGIT
EARNINGS GROWTH FOR FIRST QUARTER
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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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2005 2004 Change
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Total Revenues $880.6 $822.4 7.1%
Net Operating Income $109.1 $ 96.6 12.9%
Net Income $114.3 $106.4 7.4%
Diluted Earnings Per Share:
Net Operating Income $ 0.59 $ 0.52 13.5%
Net Income $ 0.62 $ 0.57 8.8%
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Chicago - April 28, 2005 - Old Republic International Corporation (NYSE: ORI),
today announced that net operating earnings rose by 12.9 percent in this year's
first quarter. The increase stemmed largely from improved performance by the
Company's General and Mortgage Guaranty insurance segments. Year-over-year,
these two segments generated greater underwriting income, as well as moderate
growth of investment income.
Old Republic's consolidated net operating earnings before net realized
investment gains, amounted to $109.1 million, or 59 cents per share, for the
first quarter of 2005, up from $96.6 million, or 52 cents per share in the same
period of 2004. Inclusive of net realized investment gains, net income for this
year's first quarter amounted to $114.3 million, or 62 cents per share, versus
$106.4 million, or 57 cents per share in the year-ago period. Pretax earnings in
last year's first quarter were affected adversely by required non-recurring
stock option compensation charges of $5.6 million (or 2 cents per share after
tax), representing the expense of a vesting acceleration of stock option costs.
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Old Republic International Corporation
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Consolidated Results
The major components of Old Republic's consolidated operating income and the
resulting consolidated net income were as follows:
($ in Millions)
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Quarters Ended
March 31,
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2005 2004 % Change
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Pretax operating income (loss):
General $ 84.8 $ 74.3 14.2%
Mortgage Guaranty 64.6 57.4 12.5
Title 12.8 13.2 -3.3
Corporate and other (1.7) (2.5)
Realized investment gains (losses):
From sales 13.0 15.6
From impairments (5.1) -
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Net realized gains 7.9 15.6
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Consolidated pretax income: 168.5 158.1 6.6
Income taxes 54.2 51.7 4.8
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Net income $114.3 $106.4 7.4%
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Components of diluted earnings per share:
Net operating income $ 0.59 $ 0.52 13.5%
Net realized gains 0.03 0.05
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Net Income $ 0.62 $ 0.57 8.8%
======== ======== ========
Both net operating income and net income figures are given to highlight the
impact of certain accounting rules or securities market-driven considerations
that affect the recording of investment gains or losses and can lead to lessened
period-to-period comparability. The realization of investment gains or losses
can be highly discretionary and arbitrary due to such factors as the timing of
individual securities sales, losses from write-downs of impaired securities,
tax-planning considerations, and changes in investment management judgments
relative to the direction of securities markets or the future prospects of
individual investees or industry sectors. In particular, write-downs of
securities deemed other than temporarily impaired are affected by some of these
factors as well as industry or issuer-specific developments that can call for
the recognition of a permanent loss of market value or non-recoverability of
asset cost.
Consolidated revenues in the first quarter totaled $880.6 million, up 7.1
percent from $822.4 million in the same period of 2004. Net premiums and fees
earned were $788.8 million in this year's first quarter versus $726.6 million in
the year-ago period. Consolidated net investment income of $75.7 million for the
first three months of 2005 was up by 7.4 percent when compared to the preceding
year due primarily to the benefits of the Company's growing invested asset base.
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General Insurance Group
Old Republic's General Insurance Group, which underwrites principally commercial
property and liability insurance coverages, reported a 14.2 percent increase in
pretax operating income to $84.8 million for this year's first quarter. This
compares to $74.3 million earned during the same period of 2004. Net premiums
earned in this year's first quarter were $431.1 million, up 14.5 percent from
$376.5 million a year ago. The composite underwriting ratio for the first three
months of 2005 reflected a slight decline to 92.1 percent when compared to 93.0
percent registered in the first quarter of 2004, and a modest increase from the
very low 90.7 percent posted for all of 2004. The positive underwriting results
are attributable to a reasonably stable pricing environment and well-controlled
production and administrative expenses for substantially all of the Company's
general insurance coverages.
Mortgage Guaranty Group
Old Republic's mortgage guaranty operations posted a double digit rise of 12.5
percent in pretax operating earnings to $64.6 million in this year's first
quarter. Net premium revenues in the most recent quarter were $105.4 million, up
6.8 percent from the year-ago level of $98.7 million. Persistency for the
traditional primary book of business continued to improve, rising to 65.2
percent from 50.2 percent in the first quarter of 2004 and 64.5 percent in the
fourth quarter of 2004.
The composite underwriting ratio in the first three months of 2005 was 55.3
percent compared to 58.6 percent posted in the same quarter of 2004, and 61.1
percent for all of last year. Traditional primary business claim severity,
measured in terms of average claim reserves and payments, remained relatively
stable in this year's first quarter, as did claim frequency by comparison to the
fourth quarter of 2004. The loss ratio of 32.2 percent, while moderately higher
than the 29.5 percent loss ratio posted in the first three months of 2004, was
nonetheless lower than the 38.9 percent posted in last year's final quarter and
35.5 percent for all of 2004. Most of the quarter-over-quarter decline in the
expense ratio reflected this segment's share of the aforementioned 2004 stock
option costs, as well as a further reduction in compensation costs in the latest
quarter.
Title Insurance Group
Old Republic's title insurance business reflected slight variations in the key
components of its pretax bottom line, which dropped slightly to $12.8 million in
this year's first quarter. Premiums were down 5.0 percent quarter-over-quarter,
while escrow and other fee revenues grew by 9.0 percent. In combination, premium
and fee revenues were basically flat at $231.7 million in this year's first
quarter. Claim costs, which are influenced principally by premium revenues, were
stable for both quarterly periods, while other costs, inclusive of commissions
paid on agency-derived premium production, were similarly even year-over-year.
In combination, these factors produced a slightly higher composite ratio of 97.2
percent in this year's first quarter, compared to 97.0 percent and 96.3 percent
in the first quarter and full year of 2004, respectively. While net investment
income grew by 2.0 percent in the first three months of 2005, the gain was not
sufficient to offset the current downward bias of the Company's results from its
basic underwriting/service functions.
Corporate and Other Operations
Old Republic's small life and health business, and the corporate service
operations of the parent holding company produced combined pretax losses of $1.7
million and $2.5 million in the first quarters of 2005 and 2004, respectively.
Higher life and health pretax income was largely driven by a lower claim ratio
and slightly greater investment income, which were partially offset by higher
operating expenses. Corporate service operations were generally flat
year-over-year.
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Cash, Invested Assets and Shareholders' Equity
Cash and invested assets at March 31, 2005, totaled $7.56 billion, or $41.39 per
share, compared to $7.51 billion, or $41.19 per share, at December 31, 2004, and
$7.08 billion, or $38.92 per share, at March 31, 2004. The investment portfolio
reflects a current allocation of approximately 87 percent in fixed-maturity
securities and 6 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 of $195.6 million was slightly below the first quarter 2004 level due
primarily to the timing of payments for income taxes, claims, and the previously
announced settlement of the Title Insurance Group California litigation.
Common shareholders' equity was $3.88 billion at March 31, 2005, compared to
$3.86 billion at December 31, 2004, and $3.66 billion at March 31, 2004. Book
value per share was $21.24 at the end of March 2005, versus $21.17 at year-end
2004 and $20.16 at March 31, 2004. The latest quarter's change in book value
reflects principally additions from earnings in excess of dividend requirements,
offset by a decline in the value of investment securities 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 2005 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.
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, principally in the property and
liability, mortgage guaranty and title insurance fields. One of the nation's 50
largest publicly owned insurance organizations, Old Republic has assets of
approximately $10.7 billion and capitalization of $4.0 billion. Its current
stock market valuation is approximately $4.1 billion.
Safe Harbor Statement
Historical data pertaining to the operating performance, liquidity, and other
financial indicators 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.
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Old Republic International Corporation
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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 management in
conference calls following earnings releases, can constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Any such forward-looking statements, commentaries, or inferences, of
necessity, involve 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 impacted 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.
Additionally, mortgage guaranty results, may also be impacted by various
risk-sharing arrangements with business producers as well as the risk management
and pricing policies of government sponsored enterprises. Life and health
insurance earnings can be affected by the levels of employment and consumer
spending, variations in mortality and health trends, and changes in policy
lapsation rates. At the parent company level, operating earnings or losses are
generally reflective of the amount of debt outstanding and its cost, interest
income on temporary holdings of short-term investments, and period-to-period
variations in the costs of administering the Company's widespread operations.
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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2005 2004 Change
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<s> <c> <c> <c>
NET INCOME:
Total $114,330,704 $106,413,317 7.4%
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Per Share: Basic $0.63 $0.58 8.6%
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Diluted $0.62 $0.57 8.8%
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Average number of common and
equivalent shares outstanding
Basic 182,681,195 181,962,757
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Diluted 184,688,964 184,504,465
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COMPOSITION OF EARNINGS PER SHARE:
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Basic Earnings:
Net income, before items below $0.60 $0.53 13.2%
Realized investment gains 0.03 0.05
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Net income $0.63 $0.58 8.6%
================= ==================
Diluted Earnings:
Net income, before items below $0.59 $0.52 13.5%
Realized investment gains 0.03 0.05
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Net income $0.62 $0.57 8.8%
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BOOK VALUE PER SHARE (End of periods)(a):
As Reported $21.24 $20.16 5.4%
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Cost Basis $20.73 $18.78 10.4%
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FINANCIAL SUMMARY ($ in Millions) :
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Operating Revenues:
General $482.5 $425.4 13.4%
Mortgage Guaranty 127.0 120.2 5.7%
Title 238.4 240.7 -1.0%
Corporate & Other 24.6 20.4
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Consolidated Operating Revenues 872.6 806.8 8.2%
Realized Investment Gains 7.9 15.6
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Total Revenues $880.6 $822.4 7.1%
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Pretax Operating Income (Loss):
General $84.8 $74.3 14.2%
Mortgage Guaranty 64.6 57.4 12.5%
Title 12.8 13.2 -3.3%
Corporate & Other (1.7) (2.5)
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Total 160.5 142.5 12.7%
Realized Investment Gains 7.9 15.6
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Revenues, Net of Expenses 168.5 158.1 6.6%
Income Taxes 54.2 51.7 4.8%
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Net Income $114.3 $106.4 7.4%
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(a) "As Reported" in financial statements with all securities carried at market
value. "Cost Basis" calculation includes all investment securities at their
currently amortized original cost.
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Old Republic International Corporation
SEGMENTED OPERATING SUMMARY
($ 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
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Quarter Ended March 31, 2005
- ----------------------------
General $431.1 $47.8 $3.6 $482.5 $288.1 $109.5 $397.7 $84.8 92.1%
Mortgage 105.4 17.5 4.0 127.0 33.9 28.3 62.3 64.6 55.3%
Title 231.7 6.3 0.2 238.4 13.8 211.7 225.6 12.8 97.2%
Other 20.6 3.9 0.1 24.6 10.4 15.9 26.4 (1.7) ---
---------------------------------------------------------------------------------------------------- ------------
Consolidated $788.8 $75.7 $8.0 $872.6 $346.3 $365.6 $712.0 $160.5 88.5%
==================================================================================================== ============
Quarter Ended March 31, 2004
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General $376.5 $44.4 $4.3 $425.4 $249.2 $101.8 $351.1 $74.3 93.0%
Mortgage 98.7 16.6 4.8 120.2 29.1 33.5 62.7 57.4 58.6%
Title 234.1 6.2 0.2 240.7 13.9 213.5 227.4 13.2 97.0%
Other 17.1 3.1 0.1 20.4 9.7 13.2 23.0 (2.5) ---
---------------------------------------------------------------------------------------------------- ------------
Consolidated $726.6 $70.5 $9.6 $806.8 $302.1 $362.1 $664.2 $142.5 89.3%
==================================================================================================== ============
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Fiscal Twelve Months Ended March 31, 2005
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General $1,677.5 $186.8 $15.2 $1,879.7 $1,108.4 $427.6 $1,536.1 $343.5 90.5%
Mortgage 409.8 68.6 18.1 496.7 148.0 116.9 264.9 231.7 60.2%
Title 1,022.8 25.7 1.0 1,049.5 59.6 927.7 987.4 62.1 96.4%
Other 68.1 14.8 0.6 83.5 36.0 63.9 100.0 (16.4) ---
---------------------------------------------------------------------------------------------------- ------------
Consolidated $3,178.3 $296.0 $35.1 $3,509.5 $1,352.2 $1,536.2 $2,888.5 $621.0 89.1%
==================================================================================================== ============
Fiscal Twelve Months Ended March 31, 2004
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General $1,442.2 $175.8 $18.3 $1,636.3 $968.6 $393.8 $1,362.5 $273.8 92.9%
Mortgage 399.6 65.8 28.5 494.0 104.7 131.3 236.0 257.9 51.9%
Title 1,104.4 24.0 0.6 1,129.1 64.8 947.1 1,011.9 117.1 91.6%
Other 52.7 14.6 0.5 67.9 27.0 47.3 74.4 (6.4) ---
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Consolidated $2,999.0 $280.3 $48.1 $3,327.5 $1,165.3 $1,519.6 $2,685.0 $642.5 87.3%
==================================================================================================== ============
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Old Republic International Corporation
SEGMENTED OPERATING STATISTICS
($ in Millions)
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Quarters Ended
March 31,
--------------------------------------
2005 2004
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<s> <c> <c>
General Insurance:
Benefits and claims ratio 67.4% 67.0%
Expense ratio 24.7% 26.0%
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Composite ratio 92.1% 93.0%
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Paid loss ratio 49.5% 51.0%
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Mortgage Guaranty:
New insurance written: Traditional Primary $4,705.6 $5,899.5
Bulk 3,299.5 41.1
Other 39.8 1,165.0
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Total $8,045.0 $7,105.7
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Net risk in force: Traditional Primary $15,274.2 $15,289.7
Bulk 1,094.5 783.3
Other 580.4 509.2
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Total $16,949.2 $16,582.2
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Earned premiums: Direct $124.6 $118.5
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Net $105.4 $98.7
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Persistency/Traditional Primary 65.2% 50.2%
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Delinquency ratio: Traditional Primary 3.75% 3.67%
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Bulk 3.79% 5.62%
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Claims ratio 32.2% 29.5%
Expense ratio 23.1% 29.1%
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Composite ratio 55.3% 58.6%
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Paid loss ratio 31.6% 24.7%
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Title Insurance:
Direct orders opened 99,025 112,072
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Direct orders closed 77,118 82,579
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Claims ratio 6.0% 6.0%
Expense ratio 91.2% 91.0%
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Composite ratio 97.2% 97.0%
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Paid loss ratio 5.0% 4.4%
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