Chicago, IL – Old Republic International Corporation (NYSE: ORI) recently reported record pretax income, excluding investment gains, of $335.1 million for the fourth quarter and $1.16 billion for the full year.
These results represent growth of 20.7% for the quarter and 40.2% for the year compared to the respective 2020 periods. General Insurance and Title Insurance both produced solid underwriting results that drove consolidated combined ratios of 88.5% for the quarter and 89.9% for the year, compared to 90.3% and 93.3% in the respective 2020 periods. In addition to these strong underwriting results, total and per share net income for the quarter and year also reflect an increase in the fair value of equity securities.
Record consolidated net premiums and fees earned of $2.1 billion for the quarter and $8.0 billion for the year represent growth of 11.3% for the quarter and 18.8% for the year compared to the respective 2020 periods. General Insurance net earned premiums grew by mid-single digits over the prior year, while Title Insurance continued to experience significant growth in premium and fees attributable to a low interest rate environment and a robust real estate market. Net investment income remained relatively flat for the quarter and the year, reflecting growth in the invested asset base, offset by lower investment yields.
Book value per share advanced to $22.76 as of December 31, 2021. With the addition of dividends declared during the year, this was an increase of 21.2% over year-end 2020, primarily driven by strong operating earnings and by gains in our investment portfolio.
Old Republic’s business is managed for the long run. In this context management’s key objectives are to achieve highly profitable operating results over the long term, and to ensure balance sheet strength for the primary needs of the insurance subsidiaries’ underwriting and related services business. In this view, the evaluation of periodic and long-term results excludes consideration of all investment gains (losses). Under Generally Accepted Accounting Principles (GAAP), however, net income (loss), inclusive of investment gains (losses), is the measure of total profitability.
In management’s opinion, the focus on income (loss) excluding investment gains (losses) provides a better way to analyze, evaluate, and establish accountability for the results of the insurance operations. The inclusion of realized investment gains (losses) in net income (loss) can mask trends in operating results. That is because their realization is, more often than not, highly discretionary. Similarly, the inclusion of unrealized investment gains (losses) in equity securities can further distort such operating results with significant period-to-period fluctuations in reported net income (loss).
General Insurance net premiums earned increased 7.5% and 4.8% for the fourth quarter and full year, respectively, with rising premiums in commercial auto, financial indemnity, and property lines of coverage. Strong premium rate increases for most lines of coverage, other than workers’ compensation, high renewal retention ratios, and new business production all contributed. Net investment income decreased in both 2021 periods, reflecting lower investment yields partially offset by growth in the invested asset base.
The reported claim ratio for General Insurance improved in both 2021 periods, inclusive of favorable reserve development from prior periods and a lower current period claim provision, attributable to several years of premium rate increases and underwriting actions. Favorable development was higher in the quarter and the year due predominantly to better than expected claims experience related to workers’ compensation and commercial auto reserves on older, more developed years. The full year expense ratio was slightly elevated compared to the prior year, generally reflecting variability of sales and general expenses within the line of coverage mix, while the fourth quarter expense ratio was elevated due to certain operating expense charges.
Together, these factors produced significantly greater pretax operating income for the periods reported.
The complete results release is available here: Old Republic Reports Results for Fourth Quarter and Full Year 2021
Source: Old Republic