Old Republic Reports Results For The Second Quarter And First Half 2018
Financial Highlights (a) |
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Quarters Ended |
Six Months Ended |
||||||||||||||||||||
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||||||||
Operating revenues: |
|||||||||||||||||||||
General insurance |
$ |
923.0 |
$ |
876.7 |
5.3% |
$ |
1,827.8 |
$ |
1,725.7 |
5.9% |
|||||||||||
Title insurance |
598.6 |
565.0 |
6.0 |
1,122.3 |
1,092.8 |
2.7 |
|||||||||||||||
Corporate and other |
10.4 |
12.0 |
-13.3 |
22.1 |
24.0 |
-7.8 |
|||||||||||||||
Subtotal |
1,532.2 |
1,453.8 |
5.4 |
2,972.3 |
2,842.6 |
4.6 |
|||||||||||||||
RFIG run-off business |
25.1 |
38.3 |
-34.4 |
51.8 |
79.4 |
-34.7 |
|||||||||||||||
Total |
$ |
1,557.3 |
$ |
1,492.1 |
4.4% |
$ |
3,024.2 |
$ |
2,922.1 |
3.5% |
|||||||||||
Pretax operating income (loss): |
|||||||||||||||||||||
General insurance |
$ |
90.7 |
$ |
62.7 |
44.6% |
$ |
174.0 |
$ |
156.4 |
11.2% |
|||||||||||
Title insurance |
60.9 |
65.0 |
-6.3 |
90.4 |
105.5 |
-14.3 |
|||||||||||||||
Corporate and other |
7.9 |
4.8 |
64.1 |
14.4 |
5.9 |
142.0 |
|||||||||||||||
Subtotal |
159.5 |
132.6 |
20.3 |
278.9 |
267.9 |
4.1 |
|||||||||||||||
RFIG run-off business |
13.7 |
6.8 |
100.6 |
24.7 |
21.3 |
15.8 |
|||||||||||||||
Total |
173.3 |
139.4 |
24.3% |
303.7 |
289.3 |
5.0% |
|||||||||||||||
Pretax investment gains (losses): |
|||||||||||||||||||||
Realized from actual sale transactions |
32.0 |
6.8 |
47.5 |
21.7 |
|||||||||||||||||
Unrealized from changes in fair value |
|||||||||||||||||||||
of equity securities |
41.3 |
- |
(110.6) |
- |
|||||||||||||||||
Total realized and unrealized |
73.3 |
6.8 |
(63.1) |
21.7 |
|||||||||||||||||
Consolidated pretax income (loss) |
246.6 |
146.3 |
240.6 |
311.0 |
|||||||||||||||||
Income taxes (credits) |
48.8 |
44.6 |
38.7 |
96.2 |
|||||||||||||||||
Net income (loss) |
$ |
197.7 |
$ |
101.6 |
94.6% |
$ |
201.8 |
$ |
214.7 |
-6.0% |
|||||||||||
Components of post-tax diluted earnings per share: |
|||||||||||||||||||||
Net operating income (loss): |
|||||||||||||||||||||
General insurance |
$ |
0.24 |
$ |
0.15 |
60.0% |
$ |
0.48 |
$ |
0.37 |
29.7% |
|||||||||||
Title insurance |
0.16 |
0.14 |
14.3 |
0.24 |
0.23 |
4.3 |
|||||||||||||||
Corporate and other |
0.03 |
0.03 |
- |
0.06 |
0.05 |
20.0 |
|||||||||||||||
Subtotal |
0.43 |
0.32 |
34.4 |
0.78 |
0.65 |
20.0 |
|||||||||||||||
RFIG run-off business |
0.04 |
0.02 |
100.0 |
0.07 |
0.05 |
40.0 |
|||||||||||||||
Net operating income (loss) |
0.47 |
0.34 |
38.2% |
0.85 |
0.70 |
21.4% |
|||||||||||||||
Net realized investment gains (losses) |
0.08 |
0.01 |
0.12 |
0.04 |
|||||||||||||||||
Subtotal |
0.55 |
0.35 |
0.97 |
0.74 |
|||||||||||||||||
Net unrealized investment gains (losses) |
0.11 |
- |
(0.29) |
- |
|||||||||||||||||
Net income (loss) |
$ |
0.66 |
$ |
0.35 |
88.6% |
$ |
0.68 |
$ |
0.74 |
-8.1% |
|||||||||||
Cash dividends declared per share |
$ |
0.1950 |
$ |
0.1900 |
2.6% |
$ |
0.3900 |
$ |
0.3800 |
2.6% |
|||||||||||
Ending book value per share |
$ |
17.08 |
$ |
17.81 |
-4.1% |
||||||||||||||||
(a) Unaudited / All amounts in this report are stated in millions except per share data and percentages. |
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Effective
To enhance the comparison of earnings among the periods reported upon, the following table shows the effects of the changed corporate income tax rates and the inclusion of unrealized fair value investment gains (losses) on equity securities in 2017 results as if the new rule applied to that year's interim periods.
Quarters Ended |
|||||||
2018 |
2017 |
Change |
|||||
Pretax operating income |
$ |
173.3 |
$ |
139.4 |
24.3% |
||
Income tax expense (effective rates 19.3% and 30.3%)(a) |
33.4 |
42.2 |
-20.8 |
||||
Net operating income |
139.8 |
97.1 |
43.9% |
||||
Realized investment gains (losses) from actual sale transactions |
32.0 |
6.8 |
|||||
Income tax expense (effective rates 21.0% and 35.0%)(a) |
6.7 |
2.4 |
|||||
Net realized investment gains (losses) |
25.2 |
4.4 |
|||||
Combined pretax operating income and realized investment gains (losses) |
205.3 |
146.3 |
|||||
Income tax expense (effective rates 19.6% and 30.5%)(a) |
40.1 |
44.6 |
|||||
Combined net operating income and realized investment gains (losses) |
165.1 |
101.6 |
|||||
Unrealized gains (losses) from changes in fair value of equity securities |
41.3 |
2.7 |
(b) |
||||
Income tax expense (effective rates 21.0% and 35.0%)(a) |
8.7 |
0.9 |
(b) |
||||
Net unrealized gains (losses) |
32.6 |
1.7 |
(b) |
||||
Consolidated pretax income (loss) |
246.6 |
149.0 |
(b) |
||||
Income tax expense (effective rates 19.8% and 30.6%)(a) |
48.8 |
45.6 |
(b) |
||||
Net income (loss) |
$ |
197.7 |
$ |
103.4 |
(b) |
||
Six Months Ended |
|||||||
2018 |
2017 |
Change |
|||||
Pretax operating income |
$ |
303.7 |
$ |
289.3 |
5.0% |
||
Income tax expense (effective rates 17.1% and 30.7%)(a) |
52.0 |
88.6 |
-41.3 |
||||
Net operating income |
251.6 |
200.6 |
25.4% |
||||
Realized investment gains (losses) from actual sale transactions |
47.5 |
21.7 |
|||||
Income tax expense (effective rates 21.0% and 35.0%)(a) |
9.9 |
7.5 |
|||||
Net realized investment gains (losses) |
37.5 |
14.1 |
|||||
Combined pretax operating income and realized investment gains (losses) |
351.2 |
311.0 |
|||||
Income tax expense (effective rates 17.7% and 31.0%)(a) |
62.0 |
96.2 |
|||||
Combined net operating income and realized investment gains (losses) |
289.2 |
214.7 |
|||||
Unrealized gains (losses) from changes in fair value of equity securities |
(110.6) |
50.7 |
(b) |
||||
Income tax expense (effective rates 21.0% and 35.0%)(a) |
(23.3) |
17.7 |
(b) |
||||
Net unrealized gains (losses) |
(87.3) |
33.0 |
(b) |
||||
Consolidated pretax income (loss) |
240.6 |
361.7 |
(b) |
||||
Income tax expense (effective rates 16.1% and 31.5%)(a) |
38.7 |
114.0 |
(b) |
||||
Net income (loss) |
$ |
201.8 |
$ |
247.7 |
(b) |
||
(a) |
Effective rates based on 2018 (21%) and 2017 (35%) nominal Federal income tax rates, respectively. |
(b) |
Amounts for 2017 include the retroactive, "as if" inclusion of unrealized gains or losses on equity securities for that period. |
The above and preceding table show both net operating and net income to highlight the effects of realized and, beginning in 2018, unrealized investment gains or losses in equity securities on period-to-period comparisons. Management uses operating income, a non-GAAP financial measure, to evaluate and better explain operating performance, believing that the measure enhances an understanding of
The realization of investment gains or losses can be highly discretionary due to such factors as the timing of individual securities sales, the recording of estimated losses from write-downs of impaired securities, tax-planning and tax-rate change considerations, as well as modifications in investment management judgments regarding the direction of securities markets or the future prospects of individual investees or industry sectors. The inclusion, starting in 2018, of market-driven changes in equity investments' valuations will most likely produce greater period-to-period fluctuations in reported net income, particularly at times of significant instability or volatility in the securities markets. In any event, this FASB change has no effect on the management or evaluation of the Company's basic operating results, nor on the determination of such critical elements as current income taxes, debt-to-equity ratios, shareholders' equity, or insurance subsidiaries' ability to pay dividends to the ORI holding company parent.
General Insurance Results – The table below shows the major elements affecting this segment's performance for the interim periods reported upon. |
|
|||||||||||||||
Quarters Ended |
Six Months Ended |
||||||||||||||
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||
Net premiums earned |
$ |
808.5 |
$ |
769.5 |
5.1% |
$ |
1,599.7 |
$ |
1,512.3 |
5.8% |
|||||
Net investment income |
84.4 |
79.1 |
6.8 |
167.7 |
157.9 |
6.2 |
|||||||||
Other income |
30.0 |
28.0 |
6.9 |
60.3 |
55.4 |
8.9 |
|||||||||
Operating revenues |
923.0 |
876.7 |
5.3 |
1,827.8 |
1,725.7 |
5.9 |
|||||||||
Claim costs |
578.1 |
573.0 |
0.9 |
1,144.2 |
1,100.7 |
4.0 |
|||||||||
Sales and general expenses |
236.6 |
225.2 |
5.0 |
474.9 |
437.1 |
8.6 |
|||||||||
Interest and other costs |
17.5 |
15.7 |
11.7 |
34.6 |
31.4 |
10.2 |
|||||||||
Total operating expenses |
832.3 |
814.0 |
2.3 |
1,653.8 |
1,569.3 |
5.4 |
|||||||||
Pretax operating income (loss)(a) |
$ |
90.7 |
$ |
62.7 |
44.6% |
$ |
174.0 |
$ |
156.4 |
11.2% |
|||||
Claim ratio |
71.5% |
74.5% |
71.5% |
72.8% |
|||||||||||
Expense ratio |
25.5 |
25.6 |
25.9 |
25.2 |
|||||||||||
Composite underwriting ratio |
97.0% |
100.1% |
97.4% |
98.0% |
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(a) |
In connection with the run-off mortgage guaranty ("MI") and consumer credit indemnity ("CCI") combination, $- and |
With few exceptions, earned premiums grew for most types of coverages and markets served. The aggregating effects of recent years' and continuing premium rate increases for several insurance products, along with new business production were main contributory elements to the higher premium levels. Growth stemmed primarily from commercial automobile (trucking), national accounts, auto warranty, and the various coverages offered by a new underwriting facility established in early 2015. Net investment income gained moderately in the context of a relatively stable invested asset base and fundamentally unchanged yield environment.
As the table below indicates, year-over-year claim ratios trended down in this year's first half. Better performance was driven by
The table below shows recent annual and interim periods' trends in prior years' claim developments:
Reported Claim Ratio |
Effect of Prior Periods' |
Claim Ratio Excluding Prior |
|||
2013 |
73.6% |
(0.9)% |
74.5% |
||
2014 |
77.9 |
3.9 |
74.0 |
||
2015 |
74.1 |
1.5 |
72.6 |
||
2016 |
73.0 |
0.3 |
72.7 |
||
2017 |
71.8% |
0.7% |
71.1% |
||
2nd Quarter 2017 |
74.5% |
2.4% |
72.1% |
||
2nd Quarter 2018 |
71.5% |
- % |
71.5% |
||
1st Six Months 2017 |
72.8% |
1.9% |
70.9% |
||
1st Six Months 2018 |
71.5% |
1.0% |
70.5% |
As this year is progressing, the expense ratio is staying aligned with revenue trends.
Quarterly and even annual claim provisions, and the trends they display may not be particularly meaningful indicators of future outcomes for
Title Insurance Results – Operating results for 2018's interim periods were for the most part affected by slower growth of premiums and fees revenues, while claim costs and general expenses grew at a relatively quicker pace. |
|
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Quarters Ended |
Six Months Ended |
||||||||||||||
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||
Net premiums and fees earned |
$ |
588.9 |
$ |
555.6 |
6.0% |
$ |
1,102.8 |
$ |
1,073.6 |
2.7% |
|||||
Net investment income |
9.5 |
9.2 |
3.3 |
19.0 |
18.7 |
1.4 |
|||||||||
Other income |
0.1 |
0.1 |
20.1 |
0.4 |
0.4 |
8.6 |
|||||||||
Operating revenues |
598.6 |
565.0 |
6.0 |
1,122.3 |
1,092.8 |
2.7 |
|||||||||
Claim costs |
17.0 |
11.2 |
51.1 |
29.9 |
22.2 |
34.4 |
|||||||||
Sales and general expenses |
519.6 |
486.6 |
6.8 |
999.4 |
960.7 |
4.0 |
|||||||||
Interest and other costs |
1.1 |
2.0 |
-44.2 |
2.4 |
4.2 |
-43.0 |
|||||||||
Total operating expenses |
537.7 |
499.9 |
7.6 |
1,031.8 |
987.3 |
4.5 |
|||||||||
Pretax operating income (loss) |
$ |
60.9 |
$ |
65.0 |
-6.3% |
$ |
90.4 |
$ |
105.5 |
-14.3% |
|||||
Claim ratio |
2.9% |
2.0% |
2.7% |
2.1% |
|||||||||||
Expense ratio |
88.2 |
87.6 |
90.6 |
89.4 |
|||||||||||
Composite underwriting ratio |
91.1% |
89.6% |
93.3% |
91.5% |
|||||||||||
2018 year-over-year comparisons of revenues from title premiums and fees reflected mid-single digit growth paced by independent agents' production and a slower rise in directly-produced business. By contrast, claim costs trended higher as favorable development of prior years' claim reserve estimates edged down. The following table shows recent trends in reported claim ratios, and the impact on each calendar period of (favorable) or unfavorable developments of prior years' claim reserve provisions:
Reported Claim Ratio |
Effect of Prior Periods' |
Claim Ratio Excluding |
|||
2013 |
6.7% |
(0.2)% |
6.9% |
||
2014 |
5.2 |
(0.8) |
6.0 |
||
2015 |
4.9 |
(0.6) |
5.5 |
||
2016 |
3.8 |
(1.1) |
4.9 |
||
2017 |
0.9% |
(3.3)% |
4.2% |
||
2nd Quarter 2017 |
2.0% |
(2.1)% |
4.1% |
||
2nd Quarter 2018 |
2.9% |
(1.2)% |
4.1% |
||
1st Six Months 2017 |
2.1% |
(2.0)% |
4.1% |
||
1st Six Months 2018 |
2.7% |
(1.4)% |
4.1% |
As the first table above indicates, net investment income was essentially flat as both invested asset balances and investment yields remained relatively unchanged. The operating expense ratio was within range of expectations for this segment's current business environment.
RFIG Run-off Business Results – 2018 performance was in line with the anticipated decline of insured risk in force and concomitant reduction in net premiums earned. |
RFIG Run-off Business |
|||||||||||||||
Quarters Ended |
Six Months Ended |
||||||||||||||
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||
A. |
|||||||||||||||
Net premiums earned |
$ |
19.2 |
$ |
29.1 |
-33.9% |
$ |
40.2 |
$ |
60.5 |
-33.5% |
|||||
Net investment income |
5.2 |
5.0 |
3.1 |
10.3 |
10.3 |
0.4 |
|||||||||
Claim costs |
6.2 |
10.3 |
-39.2 |
17.7 |
21.3 |
-16.6 |
|||||||||
Pretax operating income (loss)(a) |
$ |
13.8 |
$ |
19.3 |
-28.4% |
$ |
24.6 |
$ |
38.7 |
-36.4% |
|||||
Claim ratio |
32.7% |
35.5% |
44.2% |
35.2% |
|||||||||||
Expense ratio |
22.3 |
15.3 |
20.2 |
17.7 |
|||||||||||
Composite underwriting ratio |
55.0% |
50.8% |
64.4% |
52.9% |
|||||||||||
B. Consumer Credit Indemnity (CCI) |
|||||||||||||||
Net premiums earned |
$ |
0.4 |
$ |
3.7 |
-88.7% |
$ |
0.8 |
$ |
7.9 |
-89.5% |
|||||
Net investment income |
0.2 |
0.3 |
-32.7 |
0.4 |
0.6 |
-32.6 |
|||||||||
Claim costs |
0.3 |
15.9 |
-97.6 |
0.3 |
24.8 |
-98.5 |
|||||||||
Pretax operating income (loss)(a) |
$ |
(0.1) |
$ |
(12.5) |
98.9% |
$ |
- |
$ |
(17.4) |
100.3% |
|||||
Claim ratio |
91.2% |
425.8% |
44.6% |
311.0% |
|||||||||||
Expense ratio |
95.7 |
17.4 |
101.5 |
15.5 |
|||||||||||
Composite underwriting ratio |
186.9% |
443.2% |
146.1% |
326.5% |
|||||||||||
C. Total MI and CCI run-off business: |
|||||||||||||||
Net premiums earned |
$ |
19.6 |
$ |
32.9 |
-40.2% |
$ |
41.0 |
$ |
68.4 |
-40.0% |
|||||
Net investment income |
5.4 |
5.3 |
0.8 |
10.8 |
10.9 |
-1.6 |
|||||||||
Claim costs |
6.6 |
26.3 |
-74.6 |
18.1 |
46.1 |
-60.6 |
|||||||||
Pretax operating income (loss)(a) |
$ |
13.7 |
$ |
6.8 |
100.6% |
$ |
24.7 |
$ |
21.3 |
15.8% |
|||||
Claim ratio |
33.9% |
80.0% |
44.2% |
67.4% |
|||||||||||
Expense ratio |
23.9 |
15.6 |
21.9 |
17.5 |
|||||||||||
Composite underwriting ratio |
57.8% |
95.6% |
66.1% |
84.9% |
|||||||||||
(a) |
In connection with the run-off mortgage guaranty ("MI") and consumer credit indemnity ("CCI") combination, $- and |
Operating results of the run-off MI and CCI business reflect the expected, continuing drop in net earned premiums from declining risk in force. For the CCI coverage in particular, the much lower premiums in this year's interim periods resulted mostly from the elimination of a major bank business relationship which had been a significant source of both earned premiums and litigated claim costs. The ratios of MI incurred claim costs to earned premiums were reduced by 37.9 and 32.5 percentage points in this year's second quarter and first half, respectively. For the same respective periods of 2017, the reductions amounted to 27.0 and 31.1 percentage points. In each instance, the reductions reflect favorable developments of prior years' claim reserves.
The much more favorable CCI claim ratios for this years' second quarter and first half reflect the absence of the aforementioned litigation-induced claim costs which had burdened this book of business for many years through 2017's third quarter. During the latter period, provision was made for the final settlement and probable disposition of all known litigated and other claim costs incurred during the Great Recession years and their aftermath.
Corporate and Other Operations – The combination of a small life and accident insurance business and the net costs associated with operations of the parent holding company and its internal services subsidiaries usually produce highly variable results. Earnings variations posted by these operations stem from volatility inherent to the small scale of the life and accident insurance line, net investment income, and net interest charges pertaining to external and intra-system financing arrangements. This year's second quarter and first half results were enhanced by the elimination of interest costs related to outstanding debt converted into ORI common stock in March. The interplay of these various operating elements is summarized in the following table: |
Corporate and Other Operations |
|||||||||||
Quarters Ended |
Six Months Ended |
||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||
Net life and accident premiums earned |
$ |
3.0 |
$ |
4.7 |
$ |
6.9 |
$ |
9.4 |
|||
Net investment income |
7.4 |
7.3 |
15.2 |
14.6 |
|||||||
Other operating income |
- |
- |
- |
- |
|||||||
Operating revenues |
10.4 |
12.0 |
22.1 |
24.0 |
|||||||
Claim costs |
5.5 |
4.2 |
9.0 |
9.2 |
|||||||
Insurance expenses |
1.0 |
1.7 |
2.4 |
5.5 |
|||||||
Corporate, interest and other expenses - net |
(4.0) |
1.3 |
(3.7) |
3.2 |
|||||||
Total operating expenses |
2.5 |
7.2 |
7.7 |
18.0 |
|||||||
Pretax operating income (loss) |
$ |
7.9 |
$ |
4.8 |
$ |
14.4 |
$ |
5.9 |
Consolidated Results – The above summarized operating results of |
ORI Consolidated |
|||||||||||||||||
Quarters Ended |
Six Months Ended |
||||||||||||||||
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||||
Net premiums and fees earned |
$ |
1,420.2 |
$ |
1,362.8 |
4.2% |
$ |
2,750.6 |
$ |
2,663.9 |
3.3% |
|||||||
Net investment income |
106.9 |
101.0 |
5.8 |
212.7 |
202.3 |
5.1 |
|||||||||||
Other income |
30.1 |
28.2 |
7.0 |
60.7 |
55.8 |
8.9 |
|||||||||||
Operating revenues |
1,557.3 |
1,492.1 |
4.4 |
3,024.2 |
2,922.1 |
3.5 |
|||||||||||
Claim costs |
607.3 |
614.8 |
-1.2 |
1,201.4 |
1,178.2 |
2.0 |
|||||||||||
Sales and general expenses |
766.6 |
721.7 |
6.2 |
1,494.7 |
1,422.0 |
5.1 |
|||||||||||
Interest and other costs |
10.0 |
16.0 |
-37.8 |
24.4 |
32.5 |
-24.9 |
|||||||||||
Total operating expenses |
1,384.0 |
1,352.7 |
2.3 |
2,720.5 |
2,632.8 |
3.3 |
|||||||||||
Pretax operating income (loss) |
173.3 |
139.4 |
24.3 |
303.7 |
289.3 |
5.0 |
|||||||||||
Income taxes (credits) |
33.4 |
42.2 |
-20.8 |
52.0 |
88.6 |
-41.3 |
|||||||||||
Net operating income (loss) |
139.8 |
97.1 |
43.9% |
251.6 |
200.6 |
25.4% |
|||||||||||
Realized investment gains (losses) from actual sale transactions |
32.0 |
6.8 |
47.5 |
21.7 |
|||||||||||||
Income tax expense (credits) |
6.7 |
2.4 |
9.9 |
7.5 |
|||||||||||||
Net realized investment gains (losses) after tax |
25.2 |
4.4 |
37.5 |
14.1 |
|||||||||||||
Unrealized investment gains (losses) from changes in fair value of equity securities |
41.3 |
- |
(110.6) |
- |
|||||||||||||
Income tax expense (credits) |
8.7 |
- |
(23.3) |
- |
|||||||||||||
Net unrealized investment gains (losses) after tax |
32.6 |
- |
(87.3) |
- |
|||||||||||||
Net realized and unrealized investment gains (losses) |
57.9 |
4.4 |
(49.7) |
14.1 |
|||||||||||||
Net income (loss) |
$ |
197.7 |
$ |
101.6 |
94.6% |
$ |
201.8 |
$ |
214.7 |
-6.0% |
|||||||
Claim ratio |
42.8% |
45.1% |
43.7% |
44.2% |
|||||||||||||
Expense ratio |
51.5 |
50.7 |
51.8 |
51.0 |
|||||||||||||
Composite underwriting ratio |
94.3% |
95.8% |
95.5% |
95.2% |
|||||||||||||
Consolidated operating cash flow |
$ |
287.3 |
$ |
259.0 |
10.9% |
Consolidated operating cash flow was additive to investable funds and operating needs in the amount of
The sum-total of
Quarters Ended |
Six Months Ended |
|||||||||||||||
Pretax operating income: |
2018 |
2017 |
Change |
2018 |
2017 |
Change |
||||||||||
Underwriting and related services: |
||||||||||||||||
All segments except RFIG |
$ |
68.0 |
$ |
52.9 |
28.4% |
$ |
101.4 |
$ |
109.0 |
-7.0% |
||||||
RFIG run-off |
8.3 |
1.4 |
N/M |
13.9 |
10.3 |
34.2 |
||||||||||
Subtotal |
76.3 |
54.4 |
40.3 |
115.3 |
119.4 |
-3.5 |
||||||||||
Net investment income |
106.9 |
101.0 |
5.8 |
212.7 |
202.3 |
5.1 |
||||||||||
Interest and other costs |
(10.0) |
(16.0) |
-37.8 |
(24.4) |
(32.5) |
-24.9 |
||||||||||
Total |
173.3 |
139.4 |
24.3% |
303.7 |
289.3 |
5.0% |
||||||||||
Realized investment gains (losses) from actual sale transactions |
32.0 |
6.8 |
47.5 |
21.7 |
||||||||||||
Unrealized investment gains (losses) from changes in fair value of equity securities |
41.3 |
- |
(110.6) |
- |
||||||||||||
Consolidated pretax income (loss) |
$ |
246.6 |
$ |
146.3 |
$ |
240.6 |
$ |
311.0 |
||||||||
Cash, Invested Assets, and Shareholders' Equity – The table below shows |
Cash, Invested Assets, and Shareholders' Equity |
||||||||||||||||
% Change |
||||||||||||||||
|
|
|
June '18/ |
June '18/ |
||||||||||||
2018 |
2017 |
2017 |
Dec. '17 |
June '17 |
||||||||||||
Cash and invested assets: |
||||||||||||||||
Invested assets, carried at fair value |
$ |
12,015.8 |
$ |
12,468.9 |
$ |
12,156.3 |
-3.6% |
-1.2% |
||||||||
Held to maturity, carried at amortized cost |
1,056.2 |
1,067.4 |
1,071.7 |
-1.1 |
-1.4 |
|||||||||||
Total per balance sheet |
$ |
13,072.0 |
$ |
13,536.4 |
$ |
13,228.0 |
-3.4% |
-1.2% |
||||||||
Total at original cost for all |
$ |
12,643.1 |
$ |
12,783.4 |
$ |
12,514.4 |
-1.1% |
1.0% |
||||||||
Shareholders' equity: |
Total |
$ |
5,103.4 |
$ |
4,733.3 |
$ |
4,650.8 |
7.8% |
9.7% |
|||||||
Per common share |
$ |
17.08 |
$ |
17.72 |
$ |
17.81 |
-3.6% |
-4.1% |
||||||||
Composition of shareholders' equity per share: |
||||||||||||||||
Equity before items below |
$ |
16.37 |
$ |
16.26 |
$ |
16.37 |
0.7% |
- % |
||||||||
Unrealized investment gains (losses) and other accumulated comprehensive income (loss) |
0.71 |
1.46 |
1.44 |
|||||||||||||
Total |
$ |
17.08 |
$ |
17.72 |
$ |
17.81 |
-3.6% |
-4.1% |
||||||||
Segmented composition of shareholders' equity per share: |
||||||||||||||||
Excluding run-off segment |
$ |
15.63 |
$ |
16.14 |
$ |
16.44 |
-3.2% |
-4.9% |
||||||||
RFIG run-off segment |
1.45 |
1.58 |
1.37 |
|||||||||||||
Consolidated total |
$ |
17.08 |
$ |
17.72 |
$ |
17.81 |
-3.6% |
-4.1% |
||||||||
As of
Changes in shareholders' equity per share are reflected in the following table. As shown, these resulted mostly from net income, dividend payments to shareholders, and changes in the value of invested assets carried at fair value.
Shareholders' Equity Per Share |
|||||||||||||
Quarter Ended |
Six Months Ended |
Year |
|||||||||||
2018 |
2018 |
2017 |
2017 |
||||||||||
Beginning balance |
$ |
16.82 |
$ |
17.72 |
$ |
17.16 |
$ |
17.16 |
|||||
Changes in shareholders' equity: |
|||||||||||||
Post-tax net operating income (loss) |
0.47 |
0.87 |
0.77 |
1.21 |
|||||||||
Post-tax net realized investment gains (losses) |
0.08 |
0.13 |
0.05 |
0.93 |
|||||||||
Post-tax net unrealized investment gains (losses) on securities carried at fair value: |
|||||||||||||
Reported in net income (loss) |
0.11 |
(0.30) |
- |
- |
|||||||||
Reported as other comprehensive income (loss) |
(0.17) |
(0.56) |
0.18 |
0.28 |
|||||||||
Subtotal |
(0.06) |
(0.86) |
0.18 |
0.28 |
|||||||||
Total post-tax realized and unrealized investment gains (losses) |
0.02 |
(0.73) |
0.23 |
1.21 |
|||||||||
Cash dividends (a) |
(0.1950) |
(0.3900) |
(0.3800) |
(1.7600) |
|||||||||
Debt conversion, stock issuance, and other transactions |
(0.04) |
(0.39) |
0.03 |
(0.10) |
|||||||||
Net change |
0.26 |
(0.64) |
0.65 |
0.56 |
|||||||||
Ending balance |
$ |
17.08 |
$ |
17.08 |
$ |
17.81 |
$ |
17.72 |
|||||
Percentage change for the period |
1.5% |
-3.6% |
3.8% |
3.3% |
|||||||||
(a) Full year 2017 includes a special cash dividend of |
Capitalization – The following table shows the components of ORI's total capitalization. The most significant change during the fiscal twelve-months ended |
Capitalization |
|||||||||||
|
|
|
|||||||||
2018 |
2017 |
2017 |
|||||||||
Debt: |
|||||||||||
3.75% Convertible Senior Notes due 2018 |
$ |
- |
$ |
470.6 |
$ |
548.6 |
|||||
4.875% Senior Notes due 2024 |
396.5 |
396.2 |
395.9 |
||||||||
3.875% Senior Notes due 2026 |
545.4 |
545.1 |
544.8 |
||||||||
ESSOP debt |
- |
4.2 |
4.2 |
||||||||
Other miscellaneous debt with an average yield of 3.13% |
32.4 |
32.4 |
32.4 |
||||||||
Total debt |
974.4 |
1,448.7 |
1,526.1 |
||||||||
Common shareholders' equity |
5,103.4 |
4,733.3 |
4,650.8 |
||||||||
Total capitalization |
$ |
6,077.9 |
$ |
6,182.0 |
$ |
6,176.9 |
|||||
Capitalization ratios: |
|||||||||||
Debt |
16.0% |
23.4% |
24.7% |
||||||||
Common shareholders' equity |
84.0 |
76.6 |
75.3 |
||||||||
Total |
100.0% |
100.0% |
100.0% |
||||||||
Managing Old Republic's Insurance Business for the Long-Run |
The insurance business is distinguished from most others in that the prices (premiums) charged for various insurance products are set without certainty of the ultimate claim costs that will emerge, often many years after issuance and expiration of a policy.
In this light, the Company's affairs are managed for the long run and without significant regard to the arbitrary strictures of quarterly or even annual reporting periods that American industry must observe. In
Accompanying Financial Data and Other Information:
- Summary Financial Statements and Common Stock Statistics
- About
Old Republic - Safe Harbor Statement
Financial Supplement:
- A financial supplement to this news release is available on the Company's website: www.oldrepublic.com
|
||||||||||
SummaryFinancial Statements and Common Stock Statistics (Unaudited) |
||||||||||
|
|
|
||||||||
SUMMARY BALANCE SHEETS: |
2018 |
2017 |
2017 |
|||||||
Assets: |
||||||||||
Cash and fixed maturity securities |
$ |
9,675.6 |
$ |
10,145.9 |
$ |
9,924.1 |
||||
Equity securities |
3,271.4 |
3,265.5 |
3,181.1 |
|||||||
Other invested assets |
124.9 |
124.9 |
122.8 |
|||||||
Cash and invested assets |
13,072.0 |
13,536.4 |
13,228.0 |
|||||||
Accounts and premiums receivable |
1,680.2 |
1,469.7 |
1,605.6 |
|||||||
Federal income taxes recoverable: Current |
- |
- |
27.3 |
|||||||
Prepaid federal income taxes |
114.3 |
114.3 |
114.3 |
|||||||
Reinsurance balances recoverable |
3,630.2 |
3,371.8 |
3,486.5 |
|||||||
Sundry assets |
957.3 |
911.1 |
895.1 |
|||||||
Total |
$ |
19,454.2 |
$ |
19,403.5 |
$ |
19,357.1 |
||||
Liabilities and Shareholders' Equity: |
||||||||||
Policy liabilities |
$ |
2,432.9 |
$ |
2,176.3 |
$ |
2,301.7 |
||||
Claim reserves |
9,392.5 |
9,237.6 |
9,386.6 |
|||||||
Federal income tax payable: |
Current |
8.0 |
6.5 |
- |
||||||
Deferred |
33.7 |
100.5 |
79.4 |
|||||||
Debt |
974.4 |
1,448.7 |
1,526.1 |
|||||||
Sundry liabilities |
1,508.9 |
1,700.5 |
1,412.3 |
|||||||
Shareholders' equity |
5,103.4 |
4,733.3 |
4,650.8 |
|||||||
Total |
$ |
19,454.2 |
$ |
19,403.5 |
$ |
19,357.1 |
||||
Quarters Ended |
Six Months Ended |
Fiscal Twelve Months Ended |
||||||||||||||||||
SUMMARY INCOME STATEMENTS: |
|
|
|
|||||||||||||||||
2018 |
2017 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
Net premiums and fees earned |
$ |
1,420.2 |
$ |
1,362.8 |
$ |
2,750.6 |
$ |
2,663.9 |
$ |
5,626.5 |
$ |
5,437.5 |
||||||||
Net investment income |
106.9 |
101.0 |
212.7 |
202.3 |
419.8 |
398.1 |
||||||||||||||
Other income |
30.1 |
28.2 |
60.7 |
55.8 |
107.2 |
109.1 |
||||||||||||||
Net realized investment gains (losses) from actual sale transactions |
32.0 |
6.8 |
47.5 |
21.7 |
237.4 |
43.7 |
||||||||||||||
Unrealized investment gains (losses) from changes in fair value of equity securities |
41.3 |
- |
(110.6) |
- |
(110.6) |
- |
||||||||||||||
Total revenues |
1,630.7 |
1,499.0 |
2,961.1 |
2,943.8 |
6,280.4 |
5,988.5 |
||||||||||||||
Claim costs |
607.3 |
614.8 |
1,201.4 |
1,178.2 |
2,501.9 |
2,359.2 |
||||||||||||||
Sales and general expenses |
766.6 |
721.7 |
1,494.7 |
1,422.0 |
3,068.5 |
2,902.0 |
||||||||||||||
Interest and other costs |
10.0 |
16.0 |
24.4 |
32.5 |
54.9 |
61.3 |
||||||||||||||
Total expenses |
1,384.0 |
1,352.7 |
2,720.5 |
2,632.8 |
5,625.4 |
5,322.7 |
||||||||||||||
Pretax income (loss) |
246.6 |
146.3 |
240.6 |
311.0 |
654.9 |
665.8 |
||||||||||||||
Income taxes (credits) |
48.8 |
44.6 |
38.7 |
96.2 |
107.3 |
208.1 |
||||||||||||||
Net income (loss) |
$ |
197.7 |
$ |
101.6 |
$ |
201.8 |
$ |
214.7 |
$ |
547.6 |
$ |
457.6 |
||||||||
COMMON STOCK STATISTICS: |
||||||||||||||||||||
Net income (loss): |
Basic |
$ |
.66 |
$ |
.39 |
$ |
.70 |
$ |
.82 |
$ |
1.98 |
$ |
1.76 |
|||||||
Diluted |
$ |
.66 |
$ |
.35 |
$ |
.68 |
$ |
.74 |
$ |
1.85 |
$ |
1.58 |
||||||||
Components of earnings per share: |
||||||||||||||||||||
Basic, net operating income (loss) |
$ |
.47 |
$ |
.37 |
$ |
.87 |
$ |
.77 |
$ |
1.34 |
$ |
1.65 |
||||||||
Realized investment gains (losses)from actual sale transactions |
.08 |
.02 |
.13 |
.05 |
.96 |
.11 |
||||||||||||||
Unrealized investment gains (losses) from changes in fair value of equity securities |
.11 |
- |
(.30) |
- |
(.32) |
- |
||||||||||||||
Basic net income (loss) |
$ |
.66 |
$ |
.39 |
$ |
.70 |
$ |
.82 |
$ |
1.98 |
$ |
1.76 |
||||||||
Diluted, net operating income (loss) |
$ |
.47 |
$ |
.34 |
$ |
.85 |
$ |
.70 |
$ |
1.26 |
$ |
1.49 |
||||||||
Realized investment gains (losses)from actual sale transactions |
.08 |
.01 |
.12 |
.04 |
.88 |
.09 |
||||||||||||||
Unrealized investment gains (losses) from changes in fair value of equity securities |
.11 |
- |
(.29) |
- |
(.29) |
- |
||||||||||||||
Diluted net income (loss) |
$ |
.66 |
$ |
.35 |
$ |
.68 |
$ |
.74 |
$ |
1.85 |
$ |
1.58 |
||||||||
Cash dividends on common stock |
$ |
.1950 |
$ |
.1900 |
$ |
.3900 |
$ |
.3800 |
$ |
1.7700 |
$ |
.7550 |
||||||||
Book value per share |
$ |
17.08 |
$ |
17.81 |
||||||||||||||||
Common shares outstanding: |
||||||||||||||||||||
Average basic |
299,738,944 |
261,080,770 |
289,117,369 |
260,973,860 |
276,206,495 |
260,767,451 |
||||||||||||||
Average diluted |
301,075,469 |
298,313,246 |
301,329,249 |
298,367,533 |
300,929,733 |
298,047,112 |
||||||||||||||
Actual, end of period |
302,459,507 |
263,687,811 |
||||||||||||||||||
SUMMARY STATEMENTS OF COMPREHENSIVE INCOME (LOSS): |
||||||||||||||||||||
Net income (loss) as reported |
$ |
197.7 |
$ |
101.6 |
$ |
201.8 |
$ |
214.7 |
$ |
547.6 |
$ |
457.6 |
||||||||
Post-tax net unrealized gains (losses) |
(50.6) |
5.6 |
(168.4) |
48.1 |
(142.7) |
(9.5) |
||||||||||||||
Other adjustments |
(2.9) |
1.8 |
(6.1) |
3.4 |
(18.0) |
(2.1) |
||||||||||||||
Net adjustments |
(53.6) |
7.5 |
(174.6) |
51.6 |
(160.8) |
(11.7) |
||||||||||||||
Comprehensive income (loss) |
$ |
144.1 |
$ |
109.1 |
$ |
27.2 |
$ |
266.4 |
$ |
386.8 |
$ |
445.9 |
||||||||
About
The Company is organized as an insurance holding company whose subsidiaries actively market, underwrite, and provide risk management services for a wide variety of coverages mostly in the general and title insurance fields. A long-term interest in mortgage guaranty and consumer credit indemnity coverages has devolved to a run-off operating mode in recent years.
The nature of
According to the most recent edition of
Special Conference Call Information
- Log on to the Company's website at www.oldrepublic.com 15 minutes before the call to download the necessary software, or, alternatively
- The call can also be accessed by phone at 800-401-3551.
Interested parties may also listen to a replay of the call through
Safe Harbor Statement
Historical data pertaining to the operating results, liquidity, and other performance indicators applicable to an insurance enterprise such as
Some of the oral or written statements made in the Company's reports, press releases, and conference calls following earnings releases, can constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Of necessity, any such forward-looking statements involve assumptions, uncertainties, and risks that may affect the Company's future performance. With regard to
A more detailed listing and discussion of the risks and other factors which affect the Company's risk-taking insurance business are included in Part I, Item 1A - Risk Factors, of the Company's 2017 Form 10-K Annual Report and Part II, Item 1A - Risk Factors, of the Company's recent Form 10-Q filings to the
Any forward-looking statements or commentaries speak only as of their dates.
For Please visit us at www.oldrepublic.com |
||
Alternatively, please write or call: Investor Relations 312-346-8100 |
AT OLD REPUBLIC: |
AT FINANCIAL RELATIONS BOARD: |
|
Analysts/Investors: |
(312) 346-8100 |
(212) 827-3773 |
View original content:http://www.prnewswire.com/news-releases/old-republic-reports-results-for-the-second-quarter-and-first-half-2018-300686977.html
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