Category: ORI

ORI – Should Value Investors Buy Old Republic International (ORI) Stock?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the “Value” category. Stocks with high Zacks Ranks and “A” grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is Old Republic International (ORI Free Report) . ORI is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock’s price with the company’s sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ORI has a P/S ratio of 0.92. This compares to its industry’s average P/S of 1.2.

Finally, investors should note that ORI has a P/CF ratio of 4.70. This metric takes into account a company’s operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. ORI’s P/CF compares to its industry’s average P/CF of 14.33. Over the past year, ORI’s P/CF has been as high as 141.88 and as low as 3.92, with a median of 15.14.

Value investors will likely look at more than just these metrics, but the above data helps show that Old Republic International is likely undervalued currently. And when considering the strength of its earnings outlook, ORI sticks out at as one of the market’s strongest value stocks.

ORI – Old Republic Special Dividend Letter To The Shareholders

CHICAGO, Jan. 6, 2021 /PRNewswire/ — On December 18, 2020, the Board of Directors of Old Republic International Corporation (NYSE: ORI) declared a special, one-time cash dividend of $1.00 per share payable on January 15, 2021 to shareholders of record on January 5, 2021.  The attached letter to shareholders provides further background and context to the Board’s evaluation relative to this special dividend.  The letter has also been posted to the ORI website.

About Old Republic
Chicago-based Old Republic International Corporation is one of the nation’s 50 largest shareholder-owned insurance businesses. It is a member of the Fortune 500 listing of America’s largest companies. 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. Old Republic’s general insurance business ranks among the nation’s 50 largest, while its title insurance operations are the third largest in its industry.

The nature of Old Republic’s business requires that it be managed for the long run, and its cash dividend policy reflects this long-term orientation. Here’s a summary of recent years’ total book and market returns, which includes the addition and reinvestment of cash dividend payments, in comparison with the financial performance of three selected indices similarly developed.


ORI

Selected Indices’ Compounded


Annual


Annual

Total Annual Returns


Book Value 


Market Value

Nominal  


S & P


Compounded


Compounded

Gross 

S & P

 P&C


Total


Total

Domestic  

500

Insurance


Return


Return

Product  

Index

Index

Ten Years 2000 – 2009

9.5%


7.4%

4.1%

-1.0%

4.7%

Ten Years 2010 – 2019

7.7%


14.8%

4.0%

13.6%

14.5%

Twenty Years 2000 – 2019

8.6%


11.0%

4.1%

6.1%

9.5%








According to the most recent edition of Mergent’s Dividend Achievers, Old Republic is listed in 58th place among just 113 qualifying publicly held companies, out of thousands considered, that have posted at least 25 consecutive years of annual dividend growth.

For Old Republic’s latest news releases and other corporate documents:

Please visit us at www.oldrepublic.com







Alternatively, please write or call:  Investor Relations

Old Republic International Corporation

307 North Michigan Avenue, Chicago, IL 60601

 (312) 346-8100

January 6, 2021

Dear Shareholders:

On January 15, 2021, all shareholders of record on January 5 will receive a one-time special cash dividend of $1.00 per share.  As this year begins, it seems a good time to tell you more about why we decided to return this significant amount of capital to investors.

Why the Board of Directors Declared this Special Dividend

Near the end of each year, Directors evaluate Old Republic’s capital position in relation to the business’s long-term strategy.

Nearly all of ORI’s capital is allocated and managed through 26 regulated insurance companies. Each focuses on offering many insurance and related products to core industries in the North American economy. State insurance regulations define the types of coverages our separately chartered companies may underwrite. We observe these regulatory distinctions and accounting conventions in our financial reports.

However, we manage the business as a whole. This means we consider two key factors. First: each subsidiary‘s underwriting disciplines and the balance sheet leverage that reflects its risk profile. Second: the risk management aspects of the entire enterprise. Here is some useful background and tables that describe how we do this.

We Have Sound Capital Allocation

Table A reflects the past several years’ capital allocation trends for each of the regulatory groupings of insurance underwriting subsidiaries.

The Board and Senior Management use a number of Enterprise Risk Management tools and controls to evaluate our operations. These consider such important matters as maintaining high financial ratings, plus the financial and business expectations of each subsidiary’s customer base. As a result, we determined ORI has enough appropriately allocated capital in all regards, including a reasonable cushion.

In addition, several years of favorable operating results for most subsidiaries enabled them to safely raise their dividend payments to the ORI holding company. The funds have been used principally to 1) pay regular cash dividends to our shareholders, and 2) add equity capital to several startups or long-operating subsidiaries in periodic need of capital support.

These dividend receipts exceeded those outlays and generated excess funds. These favorable results and the current evaluation of capital levels enabled Directors to declare the additional special dividend.

It’s worth noting the table shows a continuing commitment of capital to a previously active operation-the RMIC mortgage guaranty group of companies. This was placed in run-off mode in 2012, and the business remains highly capitalized, at $435 million. As we’ve reported in the past, our objective is to manage RMIC in an economically efficient and rewarding manner by: 1) selling the business to a cash buyer interested in its re-activation, or 2) holding it for a few years until nearly all of the insurance risk in force dissipates. We’re confident that either scenario will allow us to recoup cash equal to any accumulated capital balance, plus more for a variety of meaningful intangible values. With necessary regulatory approvals, we expect to gradually extract and repurpose the capital it generates.

We Specialize in Major Industries

Table B shows an average 91% of consolidated premium and fee revenue comes from three industry groupings. These account for nearly 55% of the nation’s GDP. Most major subsidiaries in the regulatory reporting segments contribute to the largest of those three industry groups (see Tables C and D).

Concentrating on industries we know well is at the core of our long-term strategy. Our primary goal is to achieve underwriting profitability over industry and economic cycles. Experience has shown that a greater possibility of long-term success rests on the following approaches to enterprise-wide, insurance risk management:

  • Select insurance coverages that are more counter-cyclical in product demand and market-pricing sensitivity
  • Select industries that tend to be counter-cyclical to achieve greater stability of revenue and profit
  • Combine industry specialization with expertise in selecting and pricing insurance coverages in which we have strong competencies

Our Approach to Underwriting Balances Profitability Over Cycles

Table C shows the positive and steadying impact these underwriting approaches have on balancing our profitability over cycles. Together with the underlying strength of ORI’s balance sheet, our focused underwriting helped us weather many economic downturns, including the Great Recession. During those years and their aftermath (2008 to 2012), our balance sheet stood strong. This shows the necessity of a diversified book of business that advances ORI’s long-term objectives in the best interests of our shareholders and other stakeholders.

Table D also shows the complementary and usually positive effects that the general economy and specific markets’ cyclical differences can have on overall underwriting profitability (see the first three columns in this table). ORI’s consolidated management of invested assets, corporate taxation, and capital resources is highly sensitive and responsive to those outcomes. They are primarily geared to individual underwriting subsidiaries’ needs and reliance on capital stability and growth to achieve their objectives in the interest of the entire enterprise.

We maintain a certain amount of permanent or debt capital for acquiring or starting new businesses. Our deep and continually updated knowledge of the insurance landscape gives us an edge in this regard. Lately, we have not seen any opportunities to purchase businesses that fit our competencies and culture. This means we’re largely focused on organic growth. We believe there are very good opportunities to: 1) retain our currently balanced, diversified book of underwriting exposures, 2) gain market share, and 3) participate in the growth of the industries we serve.

We Manage Our Business for the Long Run

In our many years’ stewardship, we have steadfastly managed our business for the long run. This recognizes its nature as a long-term undertaking that sustains resources essential to our business.  As a publicly traded company, however, we are keenly aware of the common and varying interests of our investors: individuals and large to small fiduciary institutions.

Throughout the years we have believed—and shown—that a meaningful measure of Old Republic’s stock performance is its total market return over five- to 10- year periods. This measure includes price appreciation, and intangible values that free markets may attribute at any point. We also measure our financial performance by calculating the total book return based on the actual, measurable results we can effect and achieve as business managers. The total book return calculation combines all cash dividends with the change in shareholders’ equity.

Table E shows the 52 years since ORI became a publicly traded company. You can see the total market returns to shareholders exceeded those of generally accepted baseline indices most of the time. The returns have greatly benefitted all shareholders.  These include ORI’s intellectual capital providers who—together and through the Company’s Employees Savings and Stock Ownership Plan and other benefit plans, and the direct holdings of our senior officers and Board members—represent 8.9% of outstanding shares. For the group as a whole, these aggregate holdings of 27 million shares place them as the second largest shareholder group. This follows Black Rock, Inc., the world’s biggest money management institution and our largest stockholder.

We hope this letter provides timely and pertinent context to the thinking that led to the declaration of this latest special cash dividend.

Sincerely,

On behalf of Old Republic’s Board of Directors,                                                      

Craig R. Smiddy                                                   

Aldo C. Zucaro

President and Chief Executive Officer                  

Chairman of the Board















Table A
















Capital Management: Trends and Objectives
















  • Old Republic’s blended capital allocation process is principally driven by enterprise risk management considerations based on the attained and prospective growth of regulated insurance underwriting subsidiaries and the ensuing balance sheet leverage.

















Capital Allocation Percentages by Regulatory Insurance Groups

Actual as of December 31,*


General


Title


Subtotal


Life &

Accident


Other


RFIG 

Run-off


Consolidated

2006


59.5%


8.6%


68.1%


2.2%


0.1%


29.6%


100.0%

2007


61.3%


8.8%


70.1%


2.4%


-0.1%


27.6%


100.0%

2008


62.7%


9.7%


72.4%


2.4%


0.3%


24.9%


100.0%

2009


68.3%


10.3%


78.6%


2.5%


1.3%


17.6%


100.0%

2010


71.0%


10.2%


81.2%


2.4%


3.0%


13.4%


100.0%

2011


80.0%


11.1%


91.1%


2.4%


2.0%


4.5%


100.0%

2012


83.7%


13.3%


97.0%


2.4%


2.0%


-1.4%


100.0%

2013


82.2%


13.7%


95.9%


2.1%


2.3%


-0.3%


100.0%

2014


78.0%


13.6%


91.6%


1.7%


2.3%


4.4%


100.0%

2015


78.2%


13.7%


91.9%


1.2%


1.6%


5.3%


100.0%

2016


78.0%


13.9%


91.9%


1.1%


0.5%


6.5%


100.0%

2017


76.5%


13.3%


89.8%


0.8%


1.8%


7.6%


100.0%

2018


76.5%


13.8%


90.3%


0.7%


0.9%


8.1%


100.0%

2019


75.5%


13.8%


89.3%


0.7%


2.4%


7.6%


100.0%

2020 – Nine Months

76.4%


14.8%


91.2%


0.8%


1.1%


6.9%


100.0%














































Current Long-Term Objectives

82.5%


15.0%


N/A


1.0%


1.5%


0.0%


100.0%































* Percentages are inclusive of all capital instruments.


































Table B




















Insurance Underwriting Long-Focused on Industry Specialization




















  • In addition to its insurance coverage concentrations (see Table D), Old Republic’s long-term underwriting success in its single business of insurance is most significantly due to its long history of specialization in cyclically heterogeneous industries that are at the core of the North American economy.





















Percent of Premiums and Fees Volume by Industry Groupings Underlying Specialization







General




Natural











Banking,




Manufacturing




Energy











Construction,




& Services,




Resources











Finance,




Retail &


Subtotal


(Coal, Gas, Oil,









Years Ended


Housing &


Air, Land & Sea


Wholesale 


Top 3


Utlities, Wind


Education &







December 31,


Real Estate


Transportation


Trade


Industries


& Turbines)


Government


Health Care


All Other


Total




















2006


53.6%


27.6%


8.0%


89.2%


4.0%


2.2%


0.2%


4.4%


100.0%

2007


54.8%


24.9%


9.9%


89.6%


3.7%


2.0%


0.2%


4.5%


100.0%

2008


53.5%


24.7%


12.8%


91.0%


4.0%


0.3%


0.2%


4.5%


100.0%

2009


54.7%


23.9%


13.5%


92.1%


3.4%


0.4%


0.5%


3.6%


100.0%

2010


55.5%


24.6%


11.9%


92.0%


2.9%


0.4%


0.8%


3.9%


100.0%

2011


51.6%


22.4%


16.4%


90.4%


2.7%


1.2%


2.4%


3.3%


100.0%

2012


52.5%


22.8%


14.9%


90.2%


2.7%


1.8%


2.4%


2.9%


100.0%

2013


54.0%


22.0%


15.2%


91.2%


2.6%


1.4%


2.2%


2.6%


100.0%

2014


49.7%


23.3%


17.5%


90.5%


3.0%


1.3%


2.5%


2.7%


100.0%

2015


50.9%


23.6%


17.4%


91.9%


2.5%


1.0%


2.4%


2.2%


100.0%

2016


50.3%


24.2%


17.0%


91.5%


2.2%


1.1%


2.1%


3.1%


100.0%

2017


48.5%


24.4%


18.6%


91.5%


2.2%


0.8%


1.8%


3.7%


100.0%

2018


47.7%


24.8%


18.8%


91.3%


2.4%


1.0%


1.6%


3.7%


100.0%

2019


47.6%


25.3%


18.5%


91.4%


2.3%


1.5%


1.3%


3.5%


100.0%

2020 *



















Average



















2006-2019


51.8%


24.2%


15.0%


91.0%


2.9%


1.2%


1.5%


3.5%


100.0%

Most Recent



















GDP Industry



















Distributions**


23.9%


3.6%


27.3%


54.8%


2.9%


11.8%


6.9%


23.6%


100.0%




















     * Full year 2020 data not available but is not expected to reflect any significant departure from that of 2019.

     ** Derived from data published by the U.S. Department of Commerce at https://apps.bea.gov/iTable/iTable.cfm?reqid=150&step=2&isuri=1&categories=ugdpxind






























Table C












Specialized Balance of Business:

     Leads to Greater Stability of Long-Term Operating Margins*












  • The long-term success of Old Republic’s single business of insurance underwriting has been due to the sale of insurance products delivered through four groups of state-regulated insurance underwriting subsidiaries (see Tables B and D for industry specialization and insurance coverages sold).



















RFIG



Years Ended December 31,


General (**)


Title


Subtotal


Run-off (**)


Consolidated

2006


19.9%


3.2%


14.0%


49.1%


19.4%

2007


21.1%


-1.7%


14.2%


-14.8%


8.6%

2008


20.3%


-7.1%


13.0%


-83.2%


-10.0%

2009


18.7%


0.2%


12.3%


-78.0%


-8.3%

2010


18.7%


0.8%


11.2%


-69.0%


-2.3%

2011


16.8%


2.7%


11.2%


-144.6%


-8.7%

2012


11.2%


4.4%


8.4%


-123.9%


-3.9%

2013


11.5%


6.2%


9.1%


34.8%


10.7%

2014


8.1%


5.7%


7.1%


4.0%


7.0%

2015


11.6%


8.2%


10.2%


13.4%


10.4%

2016


10.9%


9.5%


10.3%


41.1%


11.5%

2017


10.9%


10.4%


10.7%


-59.8%


9.3%

2018


11.1%


9.4%


10.4%


65.7%


11.8%

2019


10.8%


9.3%


10.1%


51.2%


11.4%

2020 – Nine Months

12.0%


10.2%


11.2%


22.8%


11.9%












Latest 5 Years’ Average

11.1%


9.3%


10.3%


22.3%


10.9%

Latest 10 Years’ Average

12.2%


6.6%


9.9%


-18.7%


5.7%























OBJECTIVES 2020 – 2024

11.0% – 13.0%


7.0% – 11.0%


10.0% – 12.0%


N/A


10.0 – 12.0%























* Pretax operating income (loss) as a percentage of net premiums and fees earned.

** Effective July 1, 2019, immaterial results of the Consumer Credit Indemnity (CCI) run-off business have been classified within the General Insurance Group for all future periods.











Table D












Insurance Underwriting: Long-Focused on Selected Insurance Coverages Offered through 26 Regulated Insurers Assigned to Four Regulatory Defined Segments












  • The long-term success of Old Republic’s single business of insurance underwriting has resulted from the blending of industry specialization (see Table B), types of insurance coverages (see Tables C and D), and a capital allocation process that maximizes utilization among regulated insurance underwriting subsidiaries to promote greater operating returns (see Table C).













Combined Underwriting Ratios*









RFIG



Years Ended December 31,


General


Title


Subtotal


Run-off


Consolidated

2006


92.4%


99.5%


95.5%


64.2%


90.0%

2007


91.3%


104.7%


95.4%


126.0%


101.5%

2008


93.1%


110.6%


97.8%


194.1%


120.9%

2009


95.6%


101.7%


97.7%


189.1%


118.5%

2010


94.7%


101.0%


97.5%


182.3%


111.4%

2011


94.4%


99.0%


96.2%


252.6%


115.8%

2012


98.7%


96.8%


97.9%


232.2%


110.4%

2013


97.3%


94.7%


96.1%


76.9%


95.0%

2014


100.8%


95.6%


98.8%


106.7%


99.4%

2015


97.6%


93.2%


95.7%


98.0%


96.0%

2016


97.8%


91.7%


95.2%


72.6%


94.6%

2017


97.3%


90.9%


94.6%


177.5%


96.7%

2018


97.2%


92.1%


95.1%


60.9%


94.7%

2019


97.5%


92.2%


95.3%


78.5%


95.1%

2020 – Nine Months

96.5%


91.2%


94.0%


110.7%


94.2%












Average 2015 – 2020

97.3%


91.9%


95.0%


99.7%


95.2%

Average 2006 – 2020

96.1%


97.0%


96.2%


134.8%


102.3%























Long-Term Objectives

90.0% – 95.0%


90.0% – 95.0%


90.0% – 95.0%


N/A


90.0% – 95.0%























* Represents the sum of the ratio of claims & claim expenses and the ratio of general expenses, both taken as percentages of premiums and fees revenues.










Table E











Total Returns Compared to Nominal GDP & Selected S&P Indices’ Returns












Old Republic International Corporation (1)

Nominal Gross Domestic Product (GDP)(2)

S&P 500 Index (3)

S&P P&C Insurance Index (3)

Year

Year End Book Value

Year End Market Price

Annual Cash Dividend Declared

Total Book Value Annual & Compounded Return

Total Market Annual & Compounded Return

Total Annual & Compounded Return

Total Annual & Compounded Return

Total Annual & Compounded Return

1968

$0.280

$0.472

$0.007


18.2%

41.8%

9.4%

11.0%


1969

0.312

0.336

0.010


15.1%

-26.6%

8.2%

-8.4%


1970

0.360

0.528

0.012


19.2%

60.7%

5.5%

3.9%


1971

0.472

0.840

0.014


34.9%

61.7%

8.5%

14.3%


1972

0.480

1.240

0.016


5.1%

49.5%

9.8%

19.0%


1973

0.472

0.456

0.018


2.2%

-61.7%

11.4%

-14.7%


1974

0.376

0.408

0.020


-16.1%

-6.1%

8.4%

-26.5%


1975

0.288

0.440

0.020


-18.1%

12.7%

9.0%

37.2%


1976

0.560

0.624

0.011


98.3%

44.4%

11.2%

23.9%


1977

0.792

0.792

0.022


45.3%

30.4%

11.1%

-7.2%


1978

0.976

0.976

0.033


27.4%

27.4%

13.0%

6.6%


1979

1.080

1.112

0.052


16.0%

19.3%

11.7%

18.6%


10 Year Annual Compound Growth Rate


17.6%

16.2%

9.9%

5.9%


1980

1.224

0.888

0.054


18.3%

-15.3%

8.8%

32.5%


1981

1.392

1.144

0.054


18.1%

34.9%

12.2%

-4.9%


1982

1.648

1.456

0.056


22.4%

32.2%

4.3%

21.6%


1983

1.888

2.353

0.058


18.1%

65.6%

8.7%

22.6%


1984

2.208

2.039

0.059


20.1%

-11.2%

11.1%

6.3%


1985

2.304

3.014

0.062


7.1%

51.4%

7.5%

31.7%


1986

2.528

2.316

0.065


12.5%

-21.0%

5.5%

18.7%


1987

2.952

1.861

0.068


19.5%

-16.7%

6.0%

5.3%


1988

3.152

2.345

0.071


9.2%

29.8%

7.9%

16.6%


1989

3.544

2.604

0.076


14.8%

14.3%

7.7%

31.7%


10 Year Annual Compound Growth Rate


15.9%

12.6%

7.9%

17.6%


1990

3.920

2.465

0.081


12.9%

-2.2%

5.7%

-3.1%

-2.3%

1991

4.456

4.207

0.086


15.9%

-74.2%

3.3%

30.5%

25.3%

1992

5.072

5.896

0.094


15.9%

42.7%

5.9%

7.6%

17.2%

1993

5.744

5.363

0.102


15.3%

-7.3%

5.2%

10.1%

-1.8%

1994

6.112

5.037

0.111


8.3%

-4.0%

6.3%

1.3%

4.8%

1995

7.248

8.415

0.121


20.6%

70.1%

4.8%

37.6%

35.4%

1996

7.768

9.511

0.148


9.2%

15.1%

5.7%

23.0%

21.5%

1997

8.312

13.222

0.178


9.3%

41.2%

6.2%

33.4%

45.5%

1998

9.216

12.000

0.206


13.4%

-7.8%

5.7%

28.6%

-6.6%

1999

9.590

7.267

0.262


6.9%

-37.5%

6.3%

21.0%

-25.5%

10 Year Annual Compound Growth Rate


12.7%

13.1%

5.5%

18.2%

10.8%

2000

11.000

17.066

0.294


17.8%

142.1%

6.5%

-9.1%

55.9%

2001

12.480

14.938

0.314


16.3%

-10.6%

3.2%

-11.9%

-8.1%

2002

13.960

14.934

0.336


14.6%

2.0%

3.4%

-22.1%

-11.0%

2003

15.650

20.288

0.890

 * 

18.5%

42.4%

4.8%

28.7%

26.4%

2004

16.940

20.240

0.403


10.8%

1.9%

6.6%

10.9%

10.4%

2005

17.530

21.008

1.312

 * 

11.2%

10.5%

6.7%

4.9%

15.1%

2006

18.910

23.280

0.590


11.2%

13.9%

6.0%

15.8%

12.8%

2007

19.710

15.410

0.630


7.6%

-31.5%

4.6%

5.6%

-14.0%

2008

15.910

11.920

0.670


-15.9%

-18.0%

1.8%

-37.0%

-29.4%

2009

16.490

10.040

0.680


7.9%

-10.1%

-1.8%

26.5%

12.4%

10 Year Annual Compound Growth Rate


9.5%

7.4%

4.1%

-1.0%

4.7%

2010

16.160

13.630

0.690


2.2%

43.4%

3.8%

15.1%

8.9%

2011

14.760

8.920

0.700


-4.3%

-27.2%

3.7%

2.1%

-0.3%

2012

14.030

10.650

0.710


-0.1%

23.4%

4.2%

16.0%

20.1%

2013

14.640

17.270

0.720


9.5%

70.7%

3.6%

32.4%

38.3%

2014

15.150

14.630

0.730


8.5%

-11.2%

4.4%

13.7%

15.7%

2015

14.980

18.630

0.740


3.8%

33.4%

4.0%

1.4%

9.5%

2016

17.160

19.000

0.750


19.6%

6.2%

2.7%

11.9%

15.7%

2017

17.720

21.380

1.760

 * 

13.5%

16.9%

4.3%

21.8%

22.4%

2018

17.230

20.570

0.780


1.6%

4.8%

5.4%

-4.4%

-4.7%

2019

$19.980

$22.370

$1.800

 * 

26.4%

17.8%

4.0%

31.5%

25.9%

10 Year Annual Compound Growth Rate


7.7%

14.8%

4.0%

13.6%

14.5%

52 Year Annual Compound Growth Rate


12.8%

12.4%

6.4%

10.2%

9.5%











Note: (*) Includes special cash dividends of $1.000, $1.000, $0.800, and $0.534 per share at September 2019 and December 2017, 2005, and 2003, respectively.

Sources: (1) Old Republic Database / (2) Nominal Gross Domestic Product from Federal Reserve Bank St. Louis. / (3) Standard & Poor’s Indices from S&P Global Market Intelligence LLC. Data for years 1989 and prior is not available for the S&P P&C Insurance Index.

Safe Harbor Statement

Historical data pertaining to the operating results, liquidity, and other performance indicators applicable to an insurance enterprise such as Old Republic are not necessarily indicative of results to be achieved in succeeding years. In addition to the factors cited below, the long-term nature of the insurance business, seasonal and annual patterns in premium production and incidence of claims, changes in yields obtained on invested assets, changes in government policies and free markets affecting inflation rates and general economic conditions, and changes in legal precedents or the application of law affecting the settlement of disputed and other claims can have a bearing on period-to-period comparisons and future operating results. Furthermore, due to the financial market and economic disruptions caused by the COVID-19 pandemic and the associated governmental responses, it is therefore possible that Old Republic’s operating results, business and financial condition could be adversely affected in subsequent periods depending on the length and severity of these disruptions.

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 Old Republic’s General Insurance segment, its results can be particularly affected by the level of market competition, which is typically a function of available capital and expected returns on such capital among competitors, the levels of investment yields and inflation rates, and periodic changes in claim frequency and severity patterns caused by natural disasters, weather conditions, accidents, illnesses, work-related injuries, and unanticipated external events. Title Insurance and RFIG Run-off results can be affected by similar factors, and by changes in national and regional housing demand and values, the availability and cost of mortgage loans, employment trends, and default rates on mortgage loans. Life and accident insurance earnings can be affected by the levels of employment and consumer spending, changes in mortality and health trends, and alterations in policy lapsation rates. At the parent holding company level, operating earnings or losses are generally reflective of the amount of debt outstanding and its cost, interest income on temporary holdings of short-term investments, and period-to-period variations in the costs of administering the Company’s widespread operations.

The General Insurance, Title Insurance, Corporate and Other Segments, and the RFIG Run-off business maintain customer information and rely upon technology platforms to conduct their business. As a result, each of them and the Company are exposed to cyber risk. Many of the Company’s operating subsidiaries maintain separate IT systems which are deemed to reduce enterprise-wide risks of potential cybersecurity incidents. However, given the potential magnitude of a significant breach, the Company continually evaluates on an enterprise-wide basis its IT hardware, security infrastructure and business practices to respond to these risks and to detect and remediate in a timely manner significant cybersecurity incidents or business process interruptions.

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 2019 Form 10-K Annual Report filing to the Securities and Exchange Commission, which is specifically incorporated herein by reference.

Any forward-looking statements or commentaries speak only as of their dates. Old Republic undertakes no obligation to publicly update or revise any and all such comments, whether as a result of new information, future events or otherwise, and accordingly they may not be unduly relied upon.  

At Old Republic:

At Financial Relations Board:



Craig R. Smiddy: President and Chief Executive Officer

Analysts/Investors: Joe Calabrese 212/827-3772

SOURCE Old Republic International Corporation

Related Links

http://oldrepublic.com

ORI – Old Republic Declares A Special, One-Time Cash Dividend Of $1.00 Per Share

CHICAGO, Dec. 18, 2020 /PRNewswire/ — The Board of Directors of Old Republic International Corporation (NYSE: ORI) has declared a special, one-time cash dividend of $1.00 per share. The dividend will be paid on January 15, 2021 to shareholders of record on January 5, 2021.

At its most recent quarterly meeting, the Board of Directors evaluated a number of factors critical to the long-term management of Old Republic’s diversified insurance business. Key among such factors were:

  • The Company’s long-term strategy and required capital resources to ensure sustainability of its integrated multi-insurance coverages, and industry-focused underwriting specializations; and
  • The capital position of the insurance underwriting subsidiaries to which substantially all of the Company’s financial resources are committed.

With this review, the Board of Directors concluded that currently available unregulated liquid funds are appropriately sufficient to allow the payment of this one-time special dividend in a fair and equitable manner to all shareholders of record.

All told, during the past five years, the Board of Directors will now have declared regular and special cash dividends of nearly $2 billion or approximately 70% of the Company’s total earnings. All such dividends will have been paid proportionately to all shareholders of record during those years. Over that same time period, Old Republic’s shareholders equity account has nonetheless grown by nearly 52% principally through retained earnings, a moderate capital raise, and market appreciation of the Company’s fixed maturity and common stock portfolios.

About Old Republic
Chicago-based Old Republic International Corporation is one of the nation’s 50 largest shareholder-owned insurance businesses. It is a member of the Fortune 500 listing of America’s largest companies. 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. Old Republic’s general insurance business ranks among the nation’s 50 largest, while its title insurance operations are the third largest in its industry.

The nature of Old Republic’s business requires that it be managed for the long run and its cash dividend policy reflects this long-term orientation. Here’s a summary of recent years’ total book and market returns, which includes the addition and reinvestment of cash dividend payments, in comparison with the financial performance of three selected indices similarly developed. 


ORI


Selected Indices’ Compounded

Total Annual Returns


Annual

Book Value Compounded Total Return

Annual

Market Value Compounded Total Return


Nominal

Gross Domestic Product

S & P

500

Index

S & P Insurance Index

Ten Years 2000 – 2009

9.5%

7.4%


4.1%

-1.0%

-3.7%

Ten Years 2010 – 2019

7.7%

14.8%


4.0%

13.6%

12.4%

Twenty Years 2000 – 2019

8.6%

11.0%


4.1%

6.1%

4.1%

According to the most recent edition of Mergent’s Dividend Achievers, Old Republic is listed in 58th place among just 113 qualifying publicly held companies, out of thousands considered, that have posted at least 25 consecutive years of annual dividend growth.

For Old Republic’s latest news releases and other corporate documents:

 

Please visit us at www.oldrepublic.com







Alternatively, please write or call:  Investor Relations

Old Republic International Corporation

307 North Michigan Avenue, Chicago, IL 60601

 (312) 346-8100

SOURCE Old Republic International Corporation

Related Links

http://oldrepublic.com

ORI – Old Republic International Corporation (ORI) CEO Craig Smiddy on Q3 2020 Results – Earnings Call Transcript

Old Republic International Corporation (NYSE:ORI) Q3 2020 Earnings Conference Call October 22, 2020 3:00 PM ET

Company Participants

Joe Calabrese – Vice President of MWW Group

Craig Smiddy – President and Chief Executive Officer

Karl Mueller – Senior Vice President and Chief Financial Officer

Carolyn Monroe – President

Conference Call Participants

Greg Peters – Raymond James

Operator

Good day, and welcome to the Old Republic International Third Quarter 2020 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Joe Calabrese with MWWPR. Please go ahead.

Joe Calabrese

Thank you. Good afternoon, everyone and thank you for joining us for the Old Republic conference call to discuss third quarter 2020 results. This morning, we distributed a copy of the press release and posted a separate statistical supplement, which we assume you have seen and/or otherwise have access to during the call. Both of the documents are available at Old Republic’s website, which is www.oldrepublic.com.

Please be advised that this call may involve forward-looking statements as discussed in the press release and statistical supplements dated October 22, 2020. Risks associated with these statements can be found in the Company’s latest SEC filings. This afternoon’s conference call will be led by Craig Smiddy, President and CEO of Old Republic International Corporation and several other senior executive members as planned for this meeting.

At this time, I’d like to turn the call over to Craig Smiddy. Please go ahead, sir.

Craig Smiddy

Thank you, Joe. Well, good afternoon, everyone and welcome again to Old Republic’s third quarter earnings call. With me today, we have our CFO, Karl Mueller; and Carolyn Monroe, the President of our Title Insurance Group.

So we’re obviously very pleased with the results we posted for this quarter, especially the record performance we saw in the Title Insurance Group, along with the improvement in the underwriting profit in the General Insurance Group. Overall, very strong quarter with $0.52 of operating income per share and a consolidated combined ratio of 92%. Although, our growth in net written premiums returns to our General Insurance Group this quarter, the pandemic has made it difficult to grow General Insurance’s net earned premiums this year. However, our Title Insurance Group set yet another production record this quarter and year-to-date.

So we continue to see the benefits of our strategy to focus on the P&C and title markets delivering a diverse portfolio of specialty products combined with an exceptional customer service record in each of these markets. As demonstrated in our results, this strategy continues to contribute to our track record of more consistent growth and profitability when we combine the two.

So at this point, I’ll turn the discussion over to Karl to review our overall consolidated financial results. Then he will turn things back to me to cover the General Insurance Group followed by Carolyn, who will discuss the Title Insurance Group, then we open up to Q&A.

So with that, Karl?

Karl Mueller

Thank you. Good afternoon, everyone. This morning, we announced third quarter net income excluding all investment gains and losses of $0.62 per diluted share, which is an increase of 21.6% from the third quarter a year ago. For the first nine months of 2020, net income, again excluding investment gains and losses was $1.50 per diluted share, which was up 10.3% from 2019.

Consolidated net premiums and fees earned grew by roughly 6.5% during the third quarter and 6% for the first nine months of the year. This growth was primarily fueled by our Title operation, as it reported strong 17% growth for both this year’s third quarter, as well as on a year-to-date basis.

Net premiums earned for the General Insurance Group were relatively flat in 2020 compared to the same periods a year ago, posting an approximate 1% decline in both 2020 periods. The run-off mortgage business earned premiums continue to decrease in line with our expectations. This segment of the business is predictably becoming even less significant to the consolidated totals.

Net investment income decreased by 5.6% for the quarter and 2.5% year-to-date net — and that’s largely attributable to lower yields that more than offset the growth in the invested asset base, and that growth results from the investment of the significant positive operating cash flows that we reported.

Looking then to underwriting results, this quarter’s consolidated combined ratio declined to 92% compared to 94.4 registered last year. For this year’s first nine months, the combined ratio improved to 94.2% from last year’s 95.2%. The improvement was driven by greater underwriting results in both the General Insurance, as well as the Title Group, as Craig and Carolyn will discuss momentarily.

All three segments recorded favorable development of claim reserves in the quarter and for the year-to-date. On a consolidated basis, this reduced the reported claim ratios for the current quarter and year-to-date periods by 1.5 percentage points and 0.9 percentage points respectively.

The allocation of invest — the investment portfolio at the end of September remain relatively unchanged with earlier 2020 and 2019 periods. Approximately three-quarters of the portfolio is invested in bonds and short-term investments, remaining 25% is allocated to equity securities, primarily large cap companies that have a long history of paying and steadily increasing dividends.

We don’t currently anticipate any material changes to our investment strategy.

Further improvement in financial markets resulted in a third quarter rise in the valuation of our equity portfolio by roughly $79 million. At September 30th, the equity portfolio reflected an unrealized gain of $412 million. And as of yesterday’s close, the portfolio had rebounded by an additional $100 million. The retention of earnings in excess of dividends paid in combination with increases in the fair value of investments during the quarter contributed to the book value per share reaching $20.39 at the end of the quarter net, inclusive of dividends paid is a 4.7% increase from June.

So now let me take a moment or two to make a few comments regarding our run-off mortgage insurance segment. One positive development is that the business has returned to operating profitability, which totaled $4.5 million for the third quarter and $8 million on a year-to-date basis. We continue to closely monitor the impact of unemployment levels, as well as the effects of government loan forbearance programs on reported delinquencies. During the third quarter, delinquencies declined by 4.4%.

And another positive note is that the proportion of delinquent loans in forbearance increased to 47% of the total, up from 41% at June. Our experience and expectation is that these loans will have a lower ultimate claim rate and therefore, we continue to segregate and reserve for this population of loans separately.

From a capital perspective, the mortgage companies’ statutory capital at the end of September totaled roughly $424 million. And after dialog with our state regulators, we expect to resume the payment of extraordinary dividends from the mortgage companies starting again in 2021. So overall, as Craig mentioned earlier, we believe the results this quarter were very favorable.

And with that overview, I’m going to now turn it back to Craig for discussion of the General Insurance Group.

Craig Smiddy

All right. Thanks, Karl. So as Karl and I both touched on compared to 2019 third quarter and year-to-date, the General Insurance Group net premiums earned remained relatively flat, mostly as a result of the pandemic, while net premiums written begin to increase once again in the third quarter. Compared to 2019 third quarter and year-to-date, pre-tax operating income rose by almost 21% in the quarter and by almost 7% year-to-date. And of course, this is resulting primarily from improved claim ratios. The overall combined ratio improved from 97.7% to 95.5% in the quarter and improved from 97.1% to 96.5% year-to-date. The claim ratios we reported were inclusive of prior year favorable development of 0.8 percentage points in the quarter and 0.5 percentage points year-to-date.

Again compared to the 2019 third quarter, net premiums earned in commercial auto grew by 1%, while net premiums written grew by 6%. This reflects some restoration of the exposure base in the third quarter, along with the positive effects of rate increases, which for this line of coverage now continue in the low teens.

Our third quarter commercial auto claim ratio improved to 80.4% compared to 85.6% in the same period of 2019. And we think this reflects the work that we have been doing year in and year out on this line of coverage, as we continue of course, with rate increases, and as we continue to perfect our stricter risk selection criteria to bring that ratio back in line with our target in the low 70s. Claim frequency, I’ll touch on here too for this line rose from the lows we saw in the second quarter, but it’s still not at the pre-pandemic levels. And as far as severity that began all the way back in 2013, we think it still continues due to higher speeds and of course, the so-called social inflation influences on settlements.

Turning to workers’ compensation, compared to the 2019 third quarter workers’ comp net premiums earned and written both fell 11% reflecting reduced exposure base, as payrolls have not rebounded certainly not to the extent that we saw with commercial auto exposures. And additionally of course, we’re — we’ve been faced with rate decreases in the marketplace on this line over the last few years. And although, there is still some rate decrease we’re approaching flat — flat rates in this line. The workers’ compensation [indiscernible] ratio came in at 54.1% compared to 55.4% in the third quarter of 2019. Here and aside from COVID-19 related claims, claim frequency here too rose from the lows that we saw in the second quarter, but frequency is still not back to the pre-pandemic levels for this line either.

Just to touch on COVID-19 workers’ compensation claims here as well. They continue to behave as we discussed following the first and second quarters with 95% of our COVID-19 workers’ compensation claims coming from loss sensitive business, such as large deductibles. And then separately 95% of the COVID-19 claims continue to be very mild in nature with very low claim payment, with less than 1% of the claim severe or fatal. So we continue to be comfortable with our current accident year loss ratio selection for workers’ comp, taking into consideration the lower frequencies, the loss sensitive nature of our business, and the high proportion of mild cases for COVID-19 claims.

Turning to general liability. Our claim ratios there show an increase in the third quarter relative to the ’19 — 2019 third quarter. But as we typically point out this is a smaller line of coverage for us and — and therefore, there is less stability in the claim ratio quarter-to-quarter. And recall, we typically provide this coverage along with workers’ comp and commercial auto coverages. So for the three of those coverages combined, the commercial auto work comp and general liability, the third quarter claim ratio came in at 72% as compared to 73% in last year’s third quarter. The remainder of our other line of coverage claim ratios, all showed improvement relative to the third quarter of 2019.

So we think our strategy that includes providing large P&C clients with loss sensitive programs continues to contribute to greater consistency in our profitability. And while it will be difficult for General Insurance to achieve our top line growth goals for this year, we will continue to seek the appropriate price for our products, and we’ll continue to focus on improving our underwriting profitability.

So with that, I’ll now turn the discussion over to Carolyn for her comments on the Title Insurance Group, who by the way along with her team continue to execute at an extremely high level providing outstanding customer service.

And Carolyn, with that, I’ll turn it to you.

Carolyn Monroe

Well, thank you, Craig. As reported this morning the Title Group posted stellar third quarter and year-to-date results for 2020. Our Title employees continue to press on effectively serving the needs of agents and customers through what continues to be very challenging times. I’m grateful and honored to be associated with such a dedicated and hardworking group of individuals.

All-time third quarter and year-to-date highs were set for both underwriting revenue and operating profit. As Karl reported earlier, total premium and fee revenue was up approximately 17% for both the quarter and year-to-date. Our pre-tax operating income of $103 million for the quarter compared to $73 million in last year’s third quarter, an increase of $30 million or 41.5%. Year-to-date, pre-tax operating income of $212 million compares to $154 million in the prior year-to-date period, an increase of $58 million or 37.9%. Year-to-date 2020, our combined ratio of 91.2% compares favorably to the 92.9% reported for the comparable 2019 period.

Technology continues to be an important focus for our industry and for our Company. We continue to make notable inroads with Pavaso, our digital closing platform to meet the growing need and expanded use of remote finding, as a result of shelter-in-place orders. We expect this growth and adoption of the digital closing model to continue due to the ease and flexibility being experienced in the marketplace, accelerating its usage and acceptance.

Within the Title Group, we implemented a robotic process automation platform and experienced early success with the initial bot and are moving forward with deployments across all areas of our business to exploit the benefits of this technology. Most notably, we expect to realize improved accuracy and compliance, benefits of scalability and increased speed and productivity, which plays to our strengths in technology and customer service.

The robust growth seen so far in 2020 reflects the continued strength in the U.S. mortgage origination market, in particular refinances. As we enter the fourth quarter, order counts remain strong, mortgage rates are projected to remain favorable, and homeowners with the renewed focus on their living space should all contribute to an expected strong finish to the year. I can’t say the loss, my heartfelt gratitude goes out to all of our employees, as they remain focused and positive, as they all deal with the increased daily challenges both professionally and personally during these difficult times. The same goes for our Title agents, who are focused on service differentiates Old Republic in the market.

Our accomplishments are achieved with the unwavering commitment of our employees and the support of our agents. As with past challenges, we will rely on the same guiding principles of integrity, managing through the long run, financial strength, protection of our policyholders, and the well-being of our employees and customers that have served us well for over the last 10 or plus years.

And with that, I will turn the call back over to Craig.

Craig Smiddy

All right. Carolyn, thank you very much. Congratulations on a great quarter and year-to-date result. So again, we’re very pleased with this quarter’s operating results both in the Title Insurance Group and the General Insurance Group. Our strategic diversification between General Insurance and Title Insurance continues to produce superior, more consistent results, and we will continue on with our focus on underwriting excellence and profitability, and of course, customer service.

So that concludes our prepared remarks, and we’ll now open up the discussion to Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from Greg Peters with Raymond James. Please go ahead.

Greg Peters

Good afternoon, team Old Republic. I guess, I have a question that focuses on a line item in each of the segments’ operating results and that’s around the paid loss ratio. And I’d like to just zero in on the year-to-date numbers. The year-to-date and the General Insurance business is running apparently around [indiscernible] which compares favorably from the year ago. And if I look at the annual comparison which is shown, you show on your statistical supplement, it’s running lower in all the preceding couple of years, you identify. Same with the Title Insurance, 1.8% versus I think 2.9% in the year ago. And then finally, we see this also in your run-off business is settled and paid loss ratio running well below last year’s results. And so I’m hitting all three segments, but it does appear like you’re building reserves, and I thought maybe you could comment on those numbers in each of the segments?

Karl Mueller

Well, Greg, this is Karl. Let me — let me kind of address your question. I mean, relative to the run-off mortgage operation, that just makes complete sense that there has been a slowdown in paid claims because of the foreclosure moratoriums and forbearance programs. Basically delinquencies are frozen in place and the payments have gone down substantially as we’ve noted in the release. Same thing, I think applies largely to the Title Insurance business. And then as far as General Insurance is concerned, I’m not aware of any unusual trends that would cause the ratio to decline. But certainly it does result in the reserve balance, on the balance sheet increasing as I think we’ve shown in the release. So nothing — nothing changed in terms of claim settlement process from an internal process perspective.

Greg Peters

Okay. Well then pivoting to the General Insurance business, your consolidated result is still tracking, I guess a little bit above what your — your 10-year average, what your target is. But it certainly seems like this quarter reflects progress being made to getting back to the low 70s, if not below the low 70s. And I know, you commented a little bit about in your opening remarks, Craig, but maybe you could add some color, as we think about it not necessarily balance of this year, but as we think about ’21 and ’22.

Craig Smiddy

Sure, Greg. Well, as we pointed out in the release, it’s very apparent to everyone that the income from our investment portfolio is under pressure. The reinvestment yield has come down. And therefore, we have taken it upon ourselves to reinforce with everyone in our organization that it is now more important than ever that we achieve the goals we have set out for ourselves as far as underwriting profitability is concerned.

And therefore, we have an underwriting excellence initiative across all of our General Insurance Group companies in which we’re all focused on reducing that claim ratio down to the levels that we — that we want to see it at. And as I say, it’s all underscored by what the future holds for investment income. So we have to — and we are focusing more than ever on profitability, and it’s coming frankly through a lot of hard work, and we would expect to continue to see improvement until we hit the numbers that we state in our release that we are targeting.

Greg Peters

Got it. I guess, the final — sorry, I’d like you to comment on, I guess, this would be that fall under the category as a softball question. But the property business, it’s a small segment for you, but so many your peers will report from quarter-to-quarter catastrophe losses and they will exclude them from the operating results, and you guys are principally a casualty oriented company. But if you look at the claim ratio on your property business, it improved this quarter relative to year ago, and against, the backdrop, where there has been a tremendous amount of catastrophe activity in the United States, so could you give us some additional color about that book of business, and why you’re able to produce the results, which compare quite favorably with most of your peers?

Craig Smiddy

Sure. Be happy to Greg. First off, it’s important to note that, as I think I mentioned on previous calls and previous quarters when we’re – [indiscernible] our business interruption exposure in particular, it’s important to note that a good amount of that property is inland marine coverage that is sold in conjunction with other lines of business. And that coverage is not necessarily exposed to the volatility of catastrophic losses.

On the other hand, we are — we do see opportunities in the marketplace in property right now. And rates are robust, and where we can add property on to our suite of offerings to our agents and brokers and insured, we’re doing that.

And one of the things that I think is very different about us is, we have very strong relationships with our reinsurance partners on this line of business, where our retention as an organization on catastrophic losses, we have reinsurance that protects all of our companies on a combined basis with a very low retention. So that, in the event of catastrophes, our reinsurance partners are taking out the volatility for us, and we’re still able to produce a result that is — again doesn’t have the volatility that you referenced that some of our peers have. So all of that rolled up together, I think kind of explains where we’re at on property.

Greg Peters

Got it. I’ll let others ask questions. Thank you for your answers.

Operator

[Operator Instructions] We will take again a question from Greg Peters with Raymond James. Please go ahead.

Greg Peters

Well, I’m [indiscernible] because I anticipated that others would ask questions, but certainly enjoy the opportunity there to get some more in. You said workers’ comp, the premiums down 11% or so in the quarter, you said pricing probably leveling out. One of the things that happens in workers’ comp, as you know, Craig, is that there is always year end premium audits that can lead to additional fluctuation in the top line. Can you talk to us a little bit about that process, and if it’s going to have any effect on the fourth quarter results or have you been sort of in this COVID environment making adjustments as we go through the year?

Craig Smiddy

Right. Greg, I understand your question. And I would tell you that indeed we have been making adjustments, as the year has progressed. We — internally here we refer to it as an accelerated premium audit, which in effect is — is what it is. And when insureds can demonstrate that their payrolls are less than what was originally estimated and what the original premium was based on, then we will make adjustments.

At the end of the second quarter, we had made premium adjustments of about $30 million and that number increased in the fourth quarter — excuse me in the — in the third quarter by another $15 million to about $45 million. So in our view, we have been addressing it as we’ve gone along, and we would not expect to see any kind of a big surprise in the fourth quarter when it comes to the premium amounts that are — that we’re seeing for workers’ compensation.

Greg Peters

Got it. The final question, I have for you would be just around account retention, customer retention. I know you called this out in previous quarters as being somewhat challenged in the context of the rate increases that you and the rest of the market are looking for particularly in commercial auto. Can you give us an update on — I guess, some additional color around retention especially as it relates to the big three coverages that you focus on?

Craig Smiddy

Sure. Customer retention remains very strong, Greg. The — in commercial auto, it is above 80% and mid 80s is where that has consistently been. The marketplace is supportive of the rate increases that we’re achieving, which is helpful. Of course, in other periods, where perhaps we saw things a bit early and might have been looking for more rate than the marketplace was looking for.

Those are more challenging times. But I would say right now, the marketplace is supportive on commercial auto. Frankly, the marketplace is supportive on all lines of business, right now. And workers’ compensation, as I mentioned in my earlier comment is coming very close to flat. And our customer retention there if you measure it by policy number is very strong, and but it’s just the exposures are down for a lot of those customers.

So on general liability, it’s a bit of a mixed bag. We are — we have tightened our risk selection criteria on that line and the combination of tighter — tighter underwriting standards on general liability along with exposures are down there substantially as well as a result of COVID. But generally our — it’s a small line as you know, and our retention ratios are — we’re very comfortable with where they are at.

Rate increases on the other lines, I kind of alluded to property that we think rates are very good in the marketplace right now. Our aviation business, our professional liability business are seeing extremely robust rate increases that the market is again supporting. So — so it’s all good. I think we’re learning from this call that when we’re hitting on all cylinders, I guess, there is just less questions. So that’s okay. I think that’s the reason.

Greg Peters

Judging from your stock price performance, I think you brought everyone speechless, which is unusual for an Old Republic investor call. So anyways, congratulations on the quarter. Talk to you next quarter.

Craig Smiddy

Thank you, Greg.

Operator

And we will take our next question from Anthony Mottolese with Dowling & Partners. Please go ahead.

Unidentified Analyst

All right. It’s actually John Heagney with Dowling & Partners. I do have one question on workers’ compensation. Could you talk maybe about the nature of your business being more loss sensitive or high deductible that in terms of being — having more stability in the underlying performance of it versus some of the market trends, and why you think it could potentially trend at a consistent level with where it’s been not experienced as much underlying pressures perhaps the market may going forward?

Craig Smiddy

Sure. John, I appreciate the question. I think the example that I gave when I talked about COVID-19 and what’s going on there with comp, I know I mentioned in our other quarters that we really don’t have a lot of the exposures to COVID-19 other than the economic impact that a lot of our peers might have except for comp. And that’s why I, in my opening comments I talked about comp and it’s just a perfect example of where — when you have a business that is focused on loss sensitive clients and when there are losses, they are sharing in those.

So it brings us back to my comments that for — while only say 60% of our — I shouldn’t say only, I should say more than 60% of our premium is loss sensitive and work comp, which we feel very good about. But then when it comes to the COVID losses, 95% of the claims that are coming in are on loss sensitive business. So again, I think it demonstrates that when things do go south, and there are challenges, the loss sensitive nature of our business model helps us control that bottom line volatility and it’s a perfect case in point of why it works.

And whenever you have financial alignment between us and the customer, the customer is focused on risk control, they are focused on claims outcome and that always bodes well for us as opposed to risk transfer client that, so to speak, hand the bag over to the insurer and — and on a guaranteed cost basis and walk away is — we think is a — is a better business model and that’s why more than 60% of our business is focused on that area.

And where we — where we don’t have loss sensitive business, we’re usually selling the guaranteed cost business in conjunction with other lines — in support of other line. So for instance, our aviation business isn’t necessarily loss sensitive work comp and our trucking is, for the majority of our trucking is not loss sensitive either, but we’re writing the other lines of business. So when we — I think it bodes well for us, if we’re writing the other lines of business, if we’re going to do it on a guaranteed cost basis.

Unidentified Analyst

Does the loss sensitive nature help retention at all in terms of just the headache it might be to move collateral from one carrier to another, as you change the program or am I off the market.

Craig Smiddy

Yes. Absolutely is the — is the response to that. No doubt about it. And that’s another reason I didn’t give, but is another reason we really like it. It’s what we call sticky. It’s — when you work with a client, and you work with them on setting up claims handling procedures for the claims that they are handling in their retention, and when you work with them on setting up collateral and other mechanism, it’s quite an extensive process. So indeed it is much stickier, much less commoditized than guaranteed cost, first dollar kind of coverages.

Unidentified Analyst

Very good. So last question. Just out of those core lines of business, well, you mentioned property is an area, you’re looking to grow. You’ve had added some other lines what you’re trying where do you see the opportunities for ORI in General Insurance growth outside of your core commercial auto workers’ comp and GL into ’21 or even ’22?

Craig Smiddy

Yes. So property is an area that as we said, we will — given the market — favorable market conditions, given our ability to control the volatility on that line of business by partnering with reinsurance partners, as you know, a lot of E&S business is property business. So we will look at opportunities in the E&S space, in the property space that arise.

Other — other lines of business, as well as I think you might have said, we don’t want to disproportionately grow our workers’ compensation or auto liability book, we’re already very heavy in — in those lines of business. Well, if there is an opportunity that comes along with commercial auto and workers’ comp, but it has other line, we will — we will look at that. But right now, our focus is — remains on specialty niches. And as long as we can focus on a specialty class or specialty niche of business, we will look at those lines.

We’ll do that both organically internally. So for instance, in our professional liability area in the last several years, we had primarily been a D&O writer. We have bolted on to that are lawyers, professional business, private D&O, other fiduciary lines — lines of business, and have grown — added numerous products to our offering there. So we’ll continue to do that. Where we have a footprint already, we look at bolt-on, adjacencies, and where we might not have footprint, we’ll look at perhaps starting something up or if other opportunities present themselves.

Unidentified Analyst

Got it. So it’s fair to say when you – if you talk about growth, I don’t know which of these are there — and any other line of business. It’s really looking at your existing distribution partners and channels and identifying what products that can be added to what you have out there versus say making a bigger player to create a new distribution channel to property, let’s say, or something of that nature. So it’s very much targeted on a certain sub-class of business within or sub-group within property or financial lines or whatever — whatever it may be?

Craig Smiddy

Well, that is organically through bolting-on, where we already have footprint. It has been a focus. But we’ve also entered into new segment. Recently, we’ve added our residual market business for workers’ compensation, whereby we service pools for workers’ compensation out of a new Minneapolis operation. We also four, five years ago, setup Old Republic Specialty and Insurance underwriters, which was focused on program managers and was a different distribution. So it really is both, John. We’ll do both if — if an — if an opportunity comes along, and it’s a different distribution model. But it’s — the key is, is it specialty focus. If it’s specialty focus, where we think we can perform better than the generalists that are out there, we will go after it.

Unidentified Analyst

Appreciate the color. That’s all I got.

Craig Smiddy

Thank you.

Operator

At this time in the moment, we have no further questions. I would like to turn the call back to management for any closing remarks.

Craig Smiddy

Okay. Well, as we — I have said, we feel like we were hitting on all cylinders this quarter, and we appreciate all your interest, and thank you for the questions. And we’ll look forward to seeing you, and talking to you again in next quarter. So thank you very much.

Operator

This concludes today’s call. Thank you for your participation. You may now disconnect.