Chicago, IL – Old Republic International Corporation (NYSE: ORI) recently reported relatively level operating earnings for this year’s second quarter, while those of the year’s first half rose modestly compared to the same period of 2016. For each of these periods, operating earnings were most positively effected by greater profits in Old Republic’s Title Insurance Group. Realized net investment gains enhanced consolidated pretax and net income to different degrees in each of the periods reported upon.
General Insurance Results
Positive general insurance earned premiums trends for 2017 were unevenly distributed among various insurance coverages and sources of business. Gains continued to be registered most prominently in commercial automobile (trucking), national accounts, home and auto warranty, and in a new underwriting facility established in early 2015. On the other hand, premium growth continued to be constrained by low volume in a large account contractors book of business faced with a particularly competitive market place, and by reduced opportunities in the gas and oil energy services field.
Net investment income growth slowed in both periods of 2017 as the yield environment continued to exhibit low returns on both fixed maturity and high quality equity securities.
The ratio of claims and related settlement costs to earned premiums rose for 2017 in comparison with the same periods of 2016. While current year claim provisions reflected moderate year-over-year declines, the ratios were driven up by unfavorable developments of prior years’ reserves of 2.4 and 1.9 percentage points in this year’s second quarter and first half, respectively. By contrast, the ratios were effected by (0.7) and (0.2) percentage point reductions stemming from favorable reserve developments in last year’s second quarter and first half, respectively. 2017’s unfavorable developments were concentrated in the Company’s largest insurance coverages of workers’ compensation, commercial automobile (trucking), and general liability. This year’s expense ratio was slightly elevated when compared with its expected long-term range of 23 percent to 25 percent. The combination of premium, claim, and expense trends were most responsible for the reduction in general insurance underwriting and pretax operating income.
Quarterly and even annual claim provisions and the trends they display may not be particularly meaningful in Old Republic’s long-term liability insurance mix of business. Absent significant economic and insurance industry dislocations in the foreseeable future, it is anticipated that reported claim ratios can be expected to range within targeted averages in the high 60 percent to low 70 percent levels. The current mix of business should result in expense ratios within the aforementioned range.
The complete results release is available here: Old Republic Results for Second Quarter and First Half of 2017
Source: Old Republic