Earnings call transcript Q4 2022

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Operator

Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Old Republic International Fourth Quarter 2022 Earnings Conference Call [Operator Instructions]. Joe Calabrese with the Financial Relations Board, you may begin.

Joe Calabrese

Thank you, Chris. thank call joining fourth to results. and Old for quarter everyone, conference Republic discuss afternoon, you us for the XXXX Good the company's morning, call. you have press and/or otherwise of separate This to supplement, seen a during access posted the financial assume and a the we which have distributed we release copy supplement statements is that this financial call Both of at January available release Difficulty] are dated in our Republic's press involve [Technical forward-looking as XXXX. the documents Web discussed the site, which XX, may and Risks these latest with statements associated in can the SEC be company's found filings. led This Craig other afternoon's conference this meeting. call will Republic for and planned President be Old CEO several International as Corporation by of and members executive senior Smiddy, to At like I this time, would Smiddy. over Craig to call the turn Please go sir. ahead,

Craig Smiddy

including distribution afternoon, and week, me Frank earlier today look President Monroe, engaging Old of fourth shareholders, welcome celebrate recognition much. our thank to again Joe, may ORI Republic's are of With some Title very business. you of quarter Carolyn Okay. the call. of the CFO Well, everyone, seen and kicked as earnings our Insurance off customers, we this of we anniversary have and of stakeholders, all our we associates, plan XXX-year you throughout with the partners year, our on as Good Republic Sodaro, officially milestone. our to this Old

effects less mortgage for in while than Insurance considerably XXXX increasing XXXX So ORI the General performance year, operating for had operating another to and mainly the due setting pretax record rates. Title income with strong contributing good significantly the results, a quarter greater of quarter, the producing interest Insurance to was pretax income

all of the and with in year. led remains position favorable prior General the our Insurance segments, in year quarter reserve development reserve Our healthy very strong by in

capital to as a balance the shareholders through as dividends year repurchases. manage of to and quarter we considerable release capital returned indicates, great the is in efficiently continue the Our position amount sheet both we share shape our and and during

and were revenues. the premium Insurance year, increased XX% decreased and for the the earned X% year net for year. net Insurance earned net in Title by Insurance the lower earned Title premiums premium and the quarter for the General by quarter and fees while fees reflecting Consolidated lower, year-over-year XX%

million General Our consolidated Insurance was our their year, pretax the produced while results for for in quarter level Title just sound for XX.X% ratio. combined reflected XX% came operating profitable billion Insurance ratio income over combined and the is $XXX respective $X quarter and for a and year. profitable Both consolidated underwriting very of the in at the as

will Title the than expectation less results Going for headwinds strong time. into of between Insurance XXXX ORI's revenue Insurance reinforces believe again Title Insurance, the our continue over soundness remain view XXXX, and and for longstanding returns once produces that XXXX. year. of P&C we earnings Insurance for Title in and considerably operating the we our steadier consolidated diversification And was income strategy which

turn things open will to followed then General up Insurance So as be which I'll Insurance, back for will and will Title we'll Q&A. who Frank the over Carolyn, to to discussion now conversation me the discuss Frank. usual, turn cover by

hand I So with that, Frank, it you. to

Frank Sodaro

On comparable the $X.XX year. basis, and and operating the everyone. for $XXX year. income a you, net share per year-over-year $XXX Thank results $X.XX were versus $X.XX for morning, reported for good for $X.XX Craig, full afternoon, million and we the quarter million versus This quarters the

due X% at book historical were prior nearly ended share offset value Although from by were in when dividends, per just adding year of to the record resulting earnings the compared our billion, by earnings, When equity operating $XX.XX. under standards. year by our lower end back both set $X.X the and periods income book The down driven X% year, of The the strong the consolidated quarter last Shareholders' driven was level value and strong increased valuations. for investment in benefited by for the quarter the primarily investment XX% and higher the results. our increase comparable year, yields, XX.X% yields higher to an valuations and respectively. nearly operating investments. year while in increased quarter from increase both investment strong was higher Net increase

of quarter, investment the rebalancing portfolio. the completed our we During

common this gains gains investment sales So XX% with of allocated short term with for unrealized with average while tax $XXX portfolio $X.X XX% to the the portfolio to book stocks. we rated after of us $X us gains The highly in bond realized yield effort gains bonds, with million. X.X This with cap compared roughly year, billion, million investment of comfortable $XX remaining X.X%. those dividend stocks bonds a leaves is year portfolio offsetting the paying realized purposes ended stock of portfolio in on X.X% on maturity a investments, by the yield Even of of net sales still for billion. giving large years a mix and the about market reducing of

by lower of respectively, development. operating points Prior Now year, points losses periods for a year for recognized In X.X compared and year segments reserve All presented. favorable driving and development. periods loss expected, total, ago. the loss favorable turning to in all consolidated for come have ratio the X.X three reserve percentage to this development benefited and the percentage than X.X X.X quarter same level

XXXX In beginning million in entered the line with dividend to with to We paid the to quarter, we [Technical insurance loans over in mortgage total $XX remaining for another dividends company trends default and $XXX as favorable, the total $XXX Difficulty] return on lower defaults in a of While holding are the rates execute will $XX worth parent on million costs to levels expected. our million our authorization, continue $XXX $XXX loss opportunistically. million repurchase to repurchased of million year-to-date. This bringing we which in and pre-COVID be the cure fall on returned over paid shares reported million newly the continue to just quarter, shareholders. of already existing higher

will call the Craig over back a Insurance. General I to of turn for discussion now

Craig Smiddy

Okay. for that. thank you Frank,

Insurance, increased here, adjustments, and Of premiums by in growth at written a what for with audit premiums you XXXX in General the our including see premiums more premium rate. is quarter the written overall to for year. were So by pace the continue net consistent X% in annual X% expectation to note the quarter grow and for premiums affected

with lines We continue rate coverage of the workers' D&O of to increases most and on exception compensation. achieve

XX%, rose XX% very XX and quarter operating the the compared The new in income $XXX was XXXX. business XX% the while points strong. including in million. to Pretax full loss by remains reserve favorable XX% XX%, loss Our renewal retention quarter ratios year the ratio and by for of for development, to production loss ratio was year

XXXX. expense XX.X% combined at loss the It year. of compared ratio, in came higher percentage Turning lines the of for the coverage, year with XX.X% commission was the X to for for to growth approximately with to The in adding XX.X% ratio ratio expense the year. lower compared XXXX XX.X% ratio, in continued ratio additional commission in point

for premiums specifically net loss in XX.X% an written to coverage, during grew the more commercial grow ratio premiums year at XX.X% to compared the continued while earned lines auto, clip X%. a the Turning to significant The 'XX. few was net XX% of of quarter,

at below So loss continues and line both damage high levels. year from severity while liability digit a loss while physical this loss benefited pre-pandemic of single still the the in level prior remains loss continues periods, level, double favorable auto coverage development frequency at auto severity digit low

Our and which are that severity increases trends. overall in line on digit we single frequency rate implies to high continue of loss cover this coverage the range,

think adequate for levels target combined relative rate we our remain So our commercial auto. to ratios

audits written mentioned workers' year, XX% at lower in relatively compensation, affected the and Loss flat XX% the Looking earlier continued quarter from ratio net last year the year. by improved premium decreases. premiums for the and to came I for rate for

year line and continuing loss favorably. favorable periods slightly too, coverage trend frequency benefited with of to severity up from development in Here this loss both prior loss

So here, levels relative our ratio targets. remain our rate too, adequate combined we think to

follow for we inflationary to to our severity specialty inflationary initiative profitability these this should adjust growth We severity growth believe We loss operational very and strategy continue appropriate. in produce we we're drive as that especially and and continue closely, environment frequency as that excellence trends Insurance And in. solid General move trends our forward. for

So Carolyn, to the turn Insurance. on to over report now I'll Title you discussion

Carolyn Monroe

group premium the Title for $XXX fee million, reported and Thank quarter Craig. XXXX. from XX% revenue fourth The down quarter you, of

income to down operating premiums were premiums and $XXX pretax fourth Agency quarter in compared XXXX. were million to million direct XX% compared XX% and of down quarter fourth 'XX. fees $XX Our of

fourth assessment to noted compared XX.X% of without have fourth combined XX.X%. been 'XX of quarter of fourth would expect for as for the ratio ratio of we combined state the the Our XXXX sales to which tax recover. release, quarter quarter XX.X% in The

increasing XX% year high compared to our While and an the represented strong of our quarter in and quarter fourth with XXXX XX% a 'XX. XX% commercial of XXXX total represented softening activity, over housing for refinance premiums the impacted premiums for reported Title all-time rates, commercial group. in full residential the market fourth decline premiums mortgage activity remained our up Commercial fourth quarter

XXXX, focus opportunities. with continue we enter a As we'll commercial on

resources structure and that with allows and to support enhance aligned to transformed in our XXXX, tools, us an to deliver we During this operations more our sector. capacity leverage internal commercial

our being we continue our will delivering technology business on part With integral an future. strategy, to digital

has equally continual highlighted current with enhancements are large our The to had network in ability digital our as the connections and portfolio. in for we throughout company, fastest essential XXXX, committed Throughout access an platforms, growth to on additional and closing to major network e-recording files is vision. agents our county will platforms. technology record process country to also electronically to we While of committed This our give of prior our ePN, electronically. in step offices counties our calls, delivery growing technology the are end-to-end counties projects the

our market the we'll customers emphasis on deliver and shareholders. and with growing take to benefits of advantage measurable continue As to an a to work the portfolio and technology the our facing our we success opportunity headwinds, our company evaluate refine, to industry, of in for enhance services

back turn that, will to Craig. With I it

Craig Smiddy

Carolyn. you, Thank

Okay.

consolidated and reflected we figures. these So produced our another results year profitable performance and as in diversification of think strategies solid specialty

now to that remarks, respond. we'll will to I Frank Q&A, And questions answer and or I'll and or our so your concludes the discussion open up to prepared Carolyn defer

up So to open can please with that, Q&A. we

Operator

[Operator Peters James. Greg Instructions] Our is first question from with Raymond

Greg Peters

does to returning Chicago like from your remarks… life lunch finest feel normal the hour prepared with during has It returned

Craig Smiddy

that Greg. for We do just you,

Greg Peters

table get ratio your for about period of sort this General to trending think how in it, it's development it's nicely. some color how the the I going but know prior annual period stabilizing? clearly at looking on your And us was loss development. you give you loss off it going What's excluding the is ex quarterly and the Is numbers, did is and trending? ratio, -- I some And start comments it where where development year So the look you press down one annual on Is this numbers a quite view talk numbers, see I at have let's you on can been reserve going as from? prior reserve it maybe do forward? And of reserve cut to but And surprise. coming looking Insurance about ticking release the prior 'XX the loss 'XX, you up?

Craig Smiddy

is, coming rate mentioned answer and I'll the question. you give development a part of that it and the then current the and additionally, the writing down that talked we beginning trending ratio, the of comes to is more down compounding the of excluding development little from lines the of reserve loss have favorably And continue that The loss when commission at I several Frank figure few year the those as when at we that. look ratios have we as compound, about prior mentioned quarters to our that to your then the one as are question one we pick. we ability reserve color period ratio latter I point mentioned ratio, effects point calls continue set result with gave turn more loss around a but Greg, expense we've more to I'll is path. in along of And say, rate expense is you first, your One a lower loss things. about higher increases the increases

there but from higher So coverage loss day, ratio expense end at the seeing the we some of mix in the of improvement be the with a of that is might of line ratio. there couple points offset

reflected the ratio, in this together period loss is excluding things here prior development. those So what are

this development talk is about I'll let coming favorable where Frank from. So more now loss

Frank Sodaro

quarter it's a similar year-to-date. Greg, So and actually yes, for the fairly story

$XXX and commercial fairly So And evenly $XXX the and had was under vast the is coming million. the quarter this development workers' comp of million majority of year auto favorable split. and it's from just

As all would D&O the the going year XXXX from XXXX. that as to for only and far and coming exception affected is mention all back in that mostly the public as we numbers, year-to-date And it's favorable years unfavorably the I XXXX. are total, the company had that developed way

Greg Peters

Has to my coverage. years all changed? was Just you to sort Frank, a follow-up that impression for a first five Old approach three as reserving years. of said on lockbox It's depending that approach to the Republic's your answer, the

Craig Smiddy

not I'll be that. changed. has happy It to answer

to recognizing cautious on good approach we're approach news. and be picks those to hand, to and we loss what the about taking very recognize an Our bad news other quick looks are whereby

that is that where been. as we necessary in. of recollection understand auto losses have might believe really spot is we three really idea compensation, generally least All it exactly comes those come it workers' it on is on think at where to is to of takes liability, it's years what And And five in. of coming when on an your to coverage years are line always

those approach has We and are there's have cases, it to if to constraints there exception. reserving requirements have our recognize an so identical But we what very much been. those can perhaps is However, redundant. be are in indications that some only could reserves do always

Greg Peters

quarter that just Craig. normalized or to fourth there clarify release, just So on Was that, exception an the that was you the approach to have?

Craig Smiddy

in were at quarter We coming workers' see of where out the and fourth auto very compensation top end did the ranges. the liability

some end way years going want back ranges those and have lines. a recognize to But was adjustment said, the of to majority of the bit the we earlier then But earnings, position than to. our report Frank to top So a there all the forced as where XXXX. perhaps we we're when in we're out is sometimes we're from it things to actuarial would

Greg Peters

a sense, ask so it year there's headwinds in Carolyn, flows you ratio higher want expense Can makes for for I'll and you. the bit It than one you little plan the the other thanks guess, fourth and you question just and revenues revisit looks where be. don't color information on going last pivot Can that. degree. to time. sort I'll as on ebbs quarter expenses it and year just -- I the of with Obviously, like to manage I of a just the volatility was you hog to and mortgage of to running sort market? probably how what's this

Carolyn Monroe

that to and to themselves year one a just as agency about within But of managed started quarter, of on is faith have before, our kind management got next we these have operations. kind model. this. be through in fourth to We lot of that going we've the adjusted we -- just there's through Recession is adjust what watching our the I business feel people Great end where the our expenses things and like, we need of have that cycles we managed with be focus they But the like of realizing to us the and

our again. a like do. out what we operation to to how and and to starting just about XXXX getting that's cutting We're and it. XXXX we're everything that week call We we're manage looked need have -- We're to talk every watching back

Operator

[Operator JMP Instructions] question Carletti is Securities. Matt next with from The

Matt Carletti

months, of least follow-up highs. in a might -- I'll applications seen It mortgage have public covered some little quarters? there. back I in Are start seems guys the rates seeing we've seen with you ask and kind a has come Title we follow a through the Title, of the But that we think like stabilization volumes recent maybe I see recent on lot their or in from what in some at bit is, just everybody not pull you domain, to in recent wanted bit. as mortgage up weeks a the question

Carolyn Monroe

that hasn't the yet. takes it for little that a while start No, and rates the hit the When hitting really it with changes originations, to Title companies.

start. wait probably I'm any we'll they So of to We're where that movement going people we start to quarter. sort always the bit, that be that's again really sit feel start when little going say we going then getting kind second we're see do used a the of they change quarter, like until And don't quarter they see of cycle back, in and -- we a in to and kind that first what's happen. to serious second in they seeing

Matt Carletti

medical then Insurance, General of and there. in kind the related, of workers' underlying loss mean drivers even costs hoping development? expected, some just kind but I of accident a drivers? pushing a is I what lot reserve to years, with have -- you that more are by the deeper back underlying maybe is the come wage that was this And specifically what or I dig the just like it some it? are just across or want where to little it's know are the comp some discussion driving could of circle than better of What of things are

Craig Smiddy

it's liability loss for and talk compensation, is that. workers' auto to this answer about In happy and for be frequency. that probably I'd case, both Matt, the same

and and anticipated been as with cost trying we follow I when in my benefit. through you than mentioned the I there compounded several loss severity you're in comments, you of frequency had loss we think Greg, in my to than mentioned back, from being have look rate those in As increases trend earn then what's some to losses response years rate have and more those was up therefore, some ended lower And and in necessary happening would frequency. and cases, I

point. in of few But leveled that it's clearly, our was is this auto, increases it single rate six a up digit those the things. combination ago, tremendous So for upper spike years on last commercial out And five, and has the years. with severity while level -- keeping at are that

liability. is severity auto an So on issue still

severity, On nowhere constraints workers' even little you compensation, because the that see around schedules billing. or as with and constraints say, you managed around I states bit inflation of general a to for respect degree various inflation near might are compensation, also the my but there's in comments, mentioned with general place to, care workers' have lot a in of medical in

has So comp gone bit frequency and on as it's technology in comp technology where accidents, from now severity story frequency safety, less benefits is as inflation again, there a particular, decade what than there's down. a But in and of not, that better medical the little here workplace for great. that comes There's emerging. too, trend workers' that's improves a

well. to as frequency on story So a back comp

Operator

The is Paul from next question Sandler. Newsome with Piper

Paul Newsome

than some changes as operating to benchmark. refi leverage, some would I as how [Technical Title. business and Why [Technical [Technical we was in a periods if in Difficulty] use chart is today of the big refresh you And same of XXXX? we revenue different -- then it talk hoping the two Difficulty] financial where your about we same Difficulty] on just question kind ask those well Could to as a kind was related that perhaps in see or an picture would see of questions. why

Craig Smiddy

clear, 'XX, to just crisis years, to comparing financial 'XX, 'XX? So back Paul, be the

Paul Newsome

slide XXXX had periods. two in as presentation, as comparing as little looks maybe bump contrasting right? look also it [refi] Yes, well, I we a think that So like revenues I your affected and well at those

Craig Smiddy

you Carolyn, if fill just let I'll you don't give initial my mind, and thoughts then in.

point to rates. interest with respect where with well mortgage this dried considerably and up of we're has that at refi, So at

they ratios perhaps of what count would So what crisis, in your and financial of you count, issues if And to the or But this down, well, was in seeing everyone point. the through as some maybe to recovery as think at the I of back have Title us current today, some order and have at how to a and they tightened and that there with looking And includes know, some some most crisis order that we I to say, very seeing those period refis. financial our count mortgages see could kind you're mortgage loss essentially were when years, in the those -- ratios dried order we understood back any seeing of question, years that were come in with pressure knock-on Comparing is environment has our look underwritten I this around of to loss was in our numbers respect the up come significantly financial find very over the because don't back environment therefore, underwritten we're in mortgages different we're effects underwriting crisis through. in expect and last all we our the many business. on substantially. to try outlet been resulted not

feel and if free said could? to what please modify I've Carolyn, said you fill to whatever or in, add I So

Carolyn Monroe

of going and nothing that Fannie to The follow like it. we think forecast, trends I is the they the I'll now. things that add are what's and bounce with one right after those we're thing showing really happened only Mae did you've refis of give the And us covered back No, that with there's we years NBA refis.

Craig Smiddy

of XX% other business the our specific are agents. larger just I in through different more our this add, two space in to independent we is that only portfolio And competitors thing than are comes Paul, would about

cost independent fixed absorb overhead essentially of given where agents the we in variable bearing we a downturns, have are the have that to don't model So level that.

in those in at that spoke touched of where at Carolyn comments. we've with commercial an to keep periods commercial relative in we're Old to earlier about mind. focus Republic, done has And time her specifically that's and what ours. thing expand the been a the the thing over residential record on a so And or some of And to in more important the headwinds we're and tried comments, on then that is pointed dividends, footprint you other is where commercial only transactions, some in that years, years, offset set of paying that intentionally facing. out which space amount five as her We've Carolyn we our helped last several

Operator

[Operator Instructions] Greg is question The James. next from Raymond with Peters

Greg Peters

So I really one on other thought follow-up. the Obviously, the other with of it's I'd reinsurance of the is their in commenting rates commented to certain some little that in commission on up sneak are have other where companies topical bit in instances. that's come And a you popped that hearing reinsurance renewals, haven't with things carriers and a they're that.

So your with renewals on view just what January about that? and your curious your experience is

Craig Smiddy

that. Greg, I'd talk be happy about to

property July our is renewal So renewal. reinsurance Xst a

will So then. hopefully, settle things down a by bit

very all Xst I And look as think we have observed, probably the January very, most industry things peers a of our renewal. tough. in

that is we that of will charge as pricing that product and for absorb higher renewal, front into we to and the prepared that to catastrophic need on the go So for be expectation we be that in additional rates cognizant the cover what our need July we now costs on our our end.

that doing already. we're So

with of manage as a some -- and of that to don't introduce attachments, bit might property like relative why retention our we The our business. have a that retention relatively a we to for other very lower we write peers to you our amount our that one thing we volatility on that's business amount property the reinsurance low you reasons the a balance peers. property, We, to a at anticipate large -- take our buy write And so property significant we know, peers, do business, relative do. don't as we of on higher know, is cat sheet writing of

judicial seeing as With would liability renewals, on reinsurance with very that business with umbrella if severity everything write we're to our respect umbrella with you compensation you we our our and will jury increasing had you hand, like observing which and it's the security line we're you lines here, has of was coverage renewal. action that also And and for in and other specific, there, trended increased. process the litigation frequency And we're and of have then on And 'XX it in D&O, significantly came in setting, abuses you're that expect that the the whereby on have expect, workers' the class losses But since that 'XX. to action commensurately casualty financing security steady. was depends reinsurance down can record verdicts, renewals, 'XX XXXX other litigation the industry. then renewals through increase that has class really pricing too,

it looking reducing So you to seeding look reinsurers on umbrella when at also about how for rate is you there a that when in lot a try get may depend talk rates, will or specific by talk coverage about But accurate liability well. as that. reinsurers to line commission they of like seeding where it addition say commission, is a to that D&O,

Operator

to management time, At questions. this remarks. further for over no I'll any are closing There turn it

Craig Smiddy

today, Much appreciated. beginning the been. years And last us interest for of our of successful as Republic's the XXX thank Well, anniversary everyone, their as XXXX and for And you. looking for discussion questions. be to at a said I year we're several Old celebrating analysts year you, we as with the all will of Okay. hope your that forward have

and So very will with next talk again thank quarter. we you all much, you

Operator

participating. you this conference thank Ladies call, for and concludes gentlemen, today's and

You may now disconnect.

Old Republic International (ORI) 26 Jan 232022 Q4 Earnings call transcript