Old Republic Reports Results For The First Quarter 2023

Old Republic International Corporation

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, inclusive of investment gains (losses), is the measure of total profitability.

In management's opinion, the focus on income excluding investment gains (losses), also described herein as segment pretax operating income, 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 can mask trends in operating results, because such realizations are often 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.

FINANCIAL HIGHLIGHTS

Quarters Ended March 31,

We believe the information presented in the following table highlights the most meaningful indicators of ORI's segmented and consolidated financial performance. The information underscores the performance of our underwriting subsidiaries, as well as our sound investment of their capital and underwriting cash flows.

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Old Republic International Corporation

Sources of Consolidated Income

(a) Includes consolidation/elimination entries.

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Old Republic International Corporation

General Insurance Segment Operating Results

General Insurance net premiums earned increased 5.9% for the quarter, driven by premium rate increases, high renewal retention ratios, and new business production. Premium growth was experienced across most lines of coverage, and was most pronounced within commercial auto. This line achieved strong rate increases which were partially offset by rate declines within public D&O and workers' compensation coverages. Net investment income increased significantly in the quarter, reflecting higher investment yields earned and to a lesser extent, growth in the invested asset base.

The reported loss ratio for General Insurance improved considerably in the quarter, inclusive of favorable reserve development from prior periods. Favorable development of 5.5% came predominantly from the commercial auto and workers' compensation lines of coverage. The current period loss costs reflect several years of premium rate increases, underwriting actions, and a shift in the line of coverage mix. The first quarter expense ratio is consistent with the prior quarter and the current line of coverage mix. Investments in new products and geographies in recent years have diversified the General Insurance business, resulting in shifts in the lines of coverage mix toward lines with higher expense ratios and lower current period loss ratios.

Together, these factors produced highly profitable combined ratios and greater pretax operating income for the quarter. For General Insurance, we target combined ratios between 90% and 95% over a full underwriting cycle, recognizing that quarterly and annual ratios and trends may deviate from this range, particularly given the long claim payment patterns associated with the business.

The following table shows recent annual and interim periods' loss ratios and the effects of loss development trends:

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Old Republic International Corporation

Title Insurance Segment Operating Results

Title Insurance net premiums and fees earned decreased by 41.6% for the quarter. Both directly produced and agency produced revenues declined, driven by a continued drop in mortgage originations resulting from a substantial increase in interest rates. Commercial premiums decreased to a lesser degree in the quarter, and represent 25% of first quarter 2023 premiums compared to 20% for 2022. Net investment income increased for the quarter, reflecting higher investment yields earned partially offset by a slightly lower invested asset base.

Title Insurance loss ratios decreased slightly for the quarter due to higher levels of favorable development as a percentage of premium. The first quarter expense ratio was elevated compared to the same period last year, generally reflecting lower directly produced revenues that carry higher fixed expenses. In addition, the 2023 ratio reflects the impending recovery of the $17.2 (3.0 percentage points) state sales tax assessment paid in the fourth quarter of last year.

Together, these factors produced a small underwriting gain and significantly lower pretax operating income for the quarter.

The following table shows recent annual and interim periods' loss ratios and the effects of loss development trends:

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