Exhibit 99.1
AUDIT COMMITTEE CHARTER
COMMITTEE'S PURPOSE
The Audit Committee (the "Committee") is appointed by the Board of
Directors of Old Republic International Corporation (the "Corporation"): (A) to
assist the Board in monitoring (1) the integrity of the financial statements of
the Corporation and the effectiveness of the Corporation's internal controls
over financial reporting, (2) the Corporation's compliance with legal and
regulatory requirements, (3) the independent auditor's qualifications and
independence, and (4) the performance of the Corporation's internal audit
function and independent auditors; and (B) to prepare the report required by the
rules of the Securities and Exchange Commission (the "Commission") to be
included in the Corporation's annual proxy statement.
COMMITTEE MEMBERSHIP
The Committee shall consist of not less than three members of the
Board, one of whom shall be designated as the chairperson, appointed by the
Board upon the recommendation of the Board's Nominating Committee. Each
appointed member must meet the independence and experience requirements under
the rules of the New York Stock Exchange and the Sarbanes-Oxley Act of 2002 (the
"Act)", and the rules promulgated by the Commission under the Securities
Exchange Act of 1934 (the "Exchange Act"). At least one member must be an "audit
committee financial expert" as defined by the Commission. No Director shall be
eligible for appointment to the Committee if he or she serves on the audit
committees of more than two other publicly held companies.
COMMITTEE MEETINGS
The Committee shall meet as often as it determines, but not less
frequently than once every fiscal quarter. The Committee shall meet periodically
with management, the internal auditors and the independent auditor in separate
executive sessions. The Committee may request any officer or employee of the
Corporation or the Corporation's outside counsel or independent auditor to
attend a meeting of the Committee or to meet with any members of, or consultants
to, the Committee. A majority of the Committee members, present in person or by
conference telephone or other conferencing equipment, shall constitute a quorum.
The Committee may form subcommittees consisting of one or more members for any
purpose it deems appropriate and may delegate to such subcommittee(s) such power
and authority as the Committee deems appropriate, other than power or authority
which the Committee is required by law or regulation or listing standard to
exercise as a whole.
DUTIES AND RESPONSIBILITIES
The Committee shall have the sole authority to appoint, retain,
compensate, evaluate and terminate the Corporation's independent auditors. The
Committee shall approve all audit engagement fees and terms, shall discuss with
the independent auditor the planning and staffing of the annual audit, and shall
approve all non-audit engagements that may be performed by the independent
auditors. The independent auditors shall report directly to the Committee, and
the Committee shall be directly responsible for the oversight of the independent
auditors, including resolution of disagreements between management and the
independent auditors.
The Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Corporation shall provide for appropriate funding, as determined
by the Committee, for payment of compensation to the independent auditors and to
any advisors employed by the Committee.
The Committee shall make regular reports to the Board. The Committee
shall review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval. The Committee shall annually
review the Committee's own performance.
The Committee, to the extent it deems necessary or appropriate, shall:
As to Financial Statement and Disclosure Matters:
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1. Review and discuss with management and the independent auditor
the Corporation's annual audited financial statements,
including footnotes and disclosures made in management's
discussion and analysis, and recommend to the Board whether
the audited financial statements should be included in the
Corporation's Form 10-K.
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2. Review and discuss with management and the independent auditor
the Corporation's quarterly financial statements prior to the
filing of its Form 10-Q.
3. Discuss with management and the independent auditor
significant financial reporting issues and judgments made in
connection with the preparation of the Corporation's financial
statements, including any changes in the Corporation's
selection or application of accounting principles, any major
issues as to the effectiveness of the Corporation's internal
controls over financial reporting and any steps being adopted
in light of significant deficiencies or material weaknesses.
4. Review and discuss with the independent auditors:
(a) All critical accounting policies and practices that are
used.
(b) Any major recommended alternative treatments of
financial information within generally accepted
accounting principles that have been discussed with
management, ramifications of the possible use of such
alternative disclosures and treatments, and the
treatment preferred by the independent auditor.
(c) Other material written communications between the
independent auditor and management such as any
management letter or schedule of unadjusted
differences.
5. The Chief Executive Officer and/or the Chief Financial Officer
shall discuss with the Committee or its Chairman any change in
accounting policies, material charges or credits, and
departures in disclosures or presentation in the Corporation's
quarterly earnings release prior to the issuance of any
release so affected.
6. Discuss with management and the independent auditor the effect
of regulatory and accounting initiatives and any off-balance
sheet structures on the Corporation's financial statements.
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7. Discuss periodically with management the Corporation's major
financial risk exposures and the steps management has taken to
monitor and control such exposures, including the
Corporation's risk assessment and risk management policies.
8. Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit, including any
difficulties encountered in the course of the audit work, any
restrictions on the scope of activities or access to requested
information, and any significant disagreements with
management.
9. Review disclosures made to the Committee by the Corporation's
CEO and CFO during their certification process for the Form
10-K and Form 10-Q about any significant deficiencies or
material weaknesses in the design or operation of internal
controls and any fraud involving management or other employees
who have a significant role in the Corporation's internal
controls.
As to Oversight of the Corporation's Relationship with the Independent Auditor:
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10. Review and evaluate the lead partner of the independent
auditor team.
11. At least annually, evaluate the independent auditor's
qualifications, performance and independence. In making its
evaluation, the Committee shall take into account the opinions
of management of the Corporation and the Corporation's
internal auditors. The Committee shall further ensure the
rotation of the lead audit partner at least every five years.
The Committee shall decide as to whether the Corporation is
obtaining high quality audits and whether rotation of the
independent auditing firm would be appropriate.
12. Recommend to the Board policies for the Corporation's hiring
of employees or former employees of the independent auditor
who participated in any capacity in the audit of the
Corporation.
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As to Oversight of the Corporation's Internal Audit Function:
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13. Review the appointment and replacement of the senior internal
auditing executive.
14. Review the significant reports to management prepared by the
internal auditing department and management's responses.
15. Discuss with the independent auditor and management the
internal audit department responsibilities, budget and
staffing and any recommended changes in the planned scope of
the internal audit, taking costs and benefits into account.
As to Compliance Oversight Responsibilities:
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16. Obtain reports from management, the Corporation's senior
internal auditing executive and the independent auditor that
the Corporation and its subsidiaries are in compliance with
applicable legal and regulatory requirements. Review reports
and disclosures of insider and affiliated party transactions.
Advise the Board with respect to the Corporation's policies
and procedures regarding compliance.
17. Establish procedures for the receipt, retention and treatment
of complaints received by the Corporation regarding accounting
and financial reporting matters, internal accounting controls
or auditing matters, and for the confidential, anonymous
submission by employees of concerns regarding material
accounting or auditing matters.
18. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and
any published reports which raise material issues regarding
the Corporation's accounting policies, internal controls over
financial reporting and financial statements and disclosures.
19. Discuss with the Corporation's General Counsel legal matters
that may have a material impact on the financial statements or
the Company's compliance policies.
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LIMITATION OF COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Corporation's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations.
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