Old Republic International (ORI) Q2 2026 earnings call transcript

Thank you, Lisa. Good afternoon, everyone, and thank you for joining us to the Old Republic Conference Call to discuss second quarter, twenty-six results. This morning, we distributed a conference release and posted a separate financial supplement. Both of the documents are available on the Old Republic's website at OldRepublic. com. Please be advised as this call may involve full looking statements as discussed in the press release dated July 23, twenty-six.

Assumptions inserted in these arrests exist that may cause results as if a material from those that fought in these full looking statements.

For more information on these assumptions on certain in these arrests, please refer to the full looking statement discussions in the press release and the company's other recent SEC filings and the response is discussed in the company's most recent form 10K and other recent SEC filings. We also may include references to net income, excluding net investment gains or net operating income, a non-GAP financial measure, in our remarks or in response to the questions.

GAP reconciliations are included in the press release. Presenting on today's conference call will be Craig Smitty, President and CEO, Frank Sedera, Chief Financial Officer, and Cowan Munro, President and CEO of Old Republic's National Title Insurance Group. Management will make some opening remarks and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir.

Okay, Joe, thank you and good afternoon, everyone, and welcome again to Old Republic's second quarter, twenty-six earnings call. So, in the quarter, we produced 238 million of consolidated pre-tax operating income, and that compares to 268 million, and our consolidated combined ratio was 95.3, and that compares to 93.6. Our annualized operating return on beginning equity stands at 12.1%, and for the first six months of the year, growth and book value per share, including dividends, stands at 7.2%. Specialty insurance grew net premiums earned by 2.3% over the second quarter of 2025, and produced 199 million of pre-tax operating income compared to 254 million.

Specialty's combined ratio was 95.5 compared to 90.7. In title insurance, we grew premiums and fees by 10% over the second quarter of 2025, and produced 56 million of pre-tax operating income compared to 24 million.

Title's combined ratio was 95.1 compared to 99. We saw some slight unfavorable prior year loss reserve development and specialty insurance, and consistent favorable prior year development in title insurance, and Frank will provide more topics, more details, I should say, on that topic, so I'll turn the discussion over to Frank, and then Frank will turn things back to me to cover specialty insurance followed by Caroline who will discuss title insurance, Frank, it's all yours.

Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of 186 million for the quarter compared to 209 million last year, and a first-year basis, comparable quarter-over-quarter results were 76 cents compared to 83 cents, so starting with investments, net investment income increased just over 6% in the quarter, primarily as a result of a larger investment base from strong operating results, and our debt issuance that took place in May.

Our average rate on corporate bonds acquired during the quarter was 4.9% compared to the average yield rolling off of about 4.2%. The total bond portfolio book yield ended the quarter at 4.8%, which was a slight increase from year-end. Turning now to loss reserves, overall in the quarter, the consolidated combined ratio benefited slightly from favorable development compared to 2.1 points of benefit last year.

This was a result of favorable development from title insurance being partially offset by unfavorable development from specialty insurance. While the primary lines of coverage for specialty insurance performed well, its run-off transactional risk business had poor claims experience, which led to reserve strengthening of 40 million in the quarter. Now as a reminder, we decided to place this business and run-off in 2024.

As for the other specialty coverages, property and commercial auto had significant favorable development, and both came in at levels higher than last year. Workers' comp had favorable development that was considerably lower than the large amount of favorable development experience last year. And general liability had a moderate level of unfavorable development.

Now we ended the quarter with book value per share of $25.33, which inclusive of regular dividends represented an increase of 7.2% since year-end. This increase resulted primarily from solid operating earnings and higher investment valuations.

In the quarter, we paid nearly $77 million in dividends and repurchased $61 million worth of our shares, leaving us with about 640 million remaining in our current repurchased program.

Finally, as a precursor to the next quarter, we expect to report a bargain purchase gain on the ECM acquisition and for ECM's results to be a creative to earnings and book value this year. To put into perspective, ECM reported direct premiums written in 2025 of just under 220 million, and they ended that year with gap equity estimated at 145 million.

And I'll turn the call back over to Craig for a discussion of specialty insurance.

Okay, friend. Thank you. Specialty insurance net premiums written were up 1.6% in the quarter after excluding some noise from the right up to retail premium on the auto warranty business written in our auto warranty operating company. We saw a strong rate increases on commercial auto and in general liability, and our overall retention ratios were consistent with what we saw in the first quarter.

As I mentioned in my opening remarks, in the quarter specialty insurance pre-text operating income was $199 million while the combined ratio was $95.5. The loss ratio for the quarter was 65.9, which included 0.3 percentage points of unfavorable prior year loss reserve development compared to 62.5% in the second quarter last year, which included 2.9 percentage points of favorable development.

Turning to the expense ratio for the quarter. It was 29.6 compared to 28.2 in the second quarter last year. As we've talked about now for a few quarters, our continued investments in the new specialty operating company's technology modernization, data analytics, and AI accounts for most of that difference in the expense ratio from last year to this year.

Looking specifically at commercial auto, the commercial auto net premiums written were up 3.6% in the quarter, while the loss ratio came in at 69.4, that's about 1 percentage point better than the second quarter last year. That improvement came from a higher level of favorable prior year loss reserve development, partially offset by a more conservative current accident year loss ratio.

Rate increases in commercial auto were in the high teens, a bit higher than the first quarter, and they were greater than the current loss trends were observing. Commercial auto retention ratios also improved in the quarter as competitors started to catch up with implementing higher rate increases in response to higher loss trends.

Turning to workers compensation, net premiums written were 8.4% lower in the quarter, while the loss ratio came in at 60.6 compared to 48.5 in the second quarter last year. With most of that difference due to the higher level of favorable prior year loss reserve development last year. We were able to hold rates flat in the quarter, and loss trends remained consistent, while frequency loss trends continued to decline.

So while we're seeing some top line pressure stemming from generally a competitive marketplace, we remain very focused on risk, adequate rates that will continue to produce profitable combined ratios. We also expect to see continuing growth in top line contributions from our newer specialty operating companies, and the ECM acquisition should contribute to top line and bottom line in the second half of the year, as Frank mentioned.

We already held a town hall with all of the ECM employees, and we'd like to take this opportunity to, again, welcome ECM to the Old Republic family.

So with that, for specialty insurance, I will now turn the discussion over to Carolyn to report on title insurance. Carolyn?

Thank you, Craig, and good afternoon, everyone. Title reported premium and fee revenue for the quarter of $773 million. This represents an increase of 11% from second quarter of 2025. After a slow seasonal start, residential transactions improved a bit this quarter, contributing to our revenue growth as well as strong commercial activity.

Premiums produced in our direct title operations were up 6% from second quarter of last year, and agency produced premiums for up 12% and made up 78% of our revenue during the quarter, up from 77% during the same quarter of last year. Commercial premiums increased this quarter, and we're 25% of our premiums earned compared to 23% in second quarter of last year. During the quarter, we saw a wide mix of transactions across many segments of the commercial sector.

Our loss ratio remained consistent this year compared to last year, reflecting our consistent and conservative reserving practices. Our expense ratio improved by 4% points to 92.1% from 96.1% in the second quarter of 2025. About two points of this improvement relate to a one-time litigation settlement expense that we disclosed in the second quarter of 2025. The rest of the improvement was driven by continued focus on operational efficiency, expense management, and the benefits of higher transaction volumes slightly offset by higher agent commissions due to a greater weighting of agency business relative to direct.

Overall, the quarter's combined ratio was 95.1%. This brought our year-to-day combined ratio down to 97.4% as we continue to make progress towards driving our combined ratio below 95%. Investment income was up to this quarter by 6%. Compared to the second quarter of 2025, reflecting steady investment yields earned on a slightly higher invested asset base. All these items produced pre-tax operating income for the quarter of 56 million up from 24 million in the second quarter of last year.

As we move into the second half of 2026, we remain focused on improving operational efficiency and expanding our margins. A key part of that effort is our partnership with Claudia and the continued rollout of our new operating system. Implementation began earlier this year and will continue through the end of next year, strengthening our foundation for a long-term success.

And I'll turn it back to Craig now.

Okay, Carolyn, thank you. So while we're seeing some top-line pressure and specialty insurance, we continue to focus on bottom-line combined ratios and the fundamentals in specialty remain strong. In title insurance, we continue to grow with some help from the real estate market and titles combined ratio continues to improve and that's a no small part because of Carolyn's leadership and driving operational efficiencies and cost savings.

So thank you for that, Carolyn. So with that, we're happy to answer any questions and either I'll answer your question or I'll ask Frank or Carolyn to respond.

Sure, Greg, I'd be happy to comment on that. And I think you're right from everything that I've seen as well. Most of the discussion centers around property and particularly catastrophic exposed property. And as you know, catastrophic exposed property is not a big portion of our portfolio.

So, you know, when it comes to property rates for us, they've not seen the type of decrease that others have perhaps seen in total property. We were down about seven and a half percent in rate.

So, when it comes to the newer entities, old republic property has not began to write premium. So, and our marching orders are to build the platform, to build it right, and there is no incentive whatsoever in the first three years to put any premium on the books. So, you know, with that, we're not impacted at all because of not writing any premium and perhaps the timing will be better by the time we are up and operational.

In ENS, again, not focused on catastrophic ENS type of business and writing mostly packaged types of business and we're able to maintain property rates there much more so than we are or than the marketplaces on the catastrophic business. So, generally that goes for our other companies as well that are writing property, they're writing it with other lines of coverage and not seeing a big drop off in rate like you are on property cat.

Got it. And, you know, pivoting to the expense side, you know, your expense ratio as you previewed last quarter is trending higher this year due to investments.

Maybe you could spend a second and just talk to us about how you're measuring the ROI on those investments in technology and, you know, what benchmarks you're looking for in terms of whether they're going to yield the success you're hoping for.

Sure. I would tell you that when it comes to the expense ratio this quarter compared to the expense ratio last quarter about a full percentage point of that is being driven by IT systems, investments, data and analytic investments, and AI investments.

And when it comes to the ROI, you know, I think it's very clear and we've already are experiencing it, even in title, maybe even especially in title with our QualRIS partnership where we're able to drive out significant amounts of hours to produce transactions with the use of modern technology that's AI enabled. So, there's no question that we have to make these investments in AI and I've set it in the path.

In order to leverage AI, you have to have data and analytics. In order to have good data and analytics, you've got to have modern IT systems. So, and frankly, some of the investments we're making in IT systems are ones that we just don't have a choice. They're operating on mainframe platforms that we just have to replace and modernize.

So, I think the ROI is just very clear that it's there. We don't have a specific number for you, but there's just no choice that we have to modernize our systems in order to be able to leverage data and analytics. And we've seen where we have leveraged data and analytics, we're able to perfect pricing to a much greater degree and we're able to do things with managing claims and losses with that data and analytics.

And then, of course, to leverage the ever changing rapid environment of AI, you have to lay that on top of your data and analytics in your systems. So, that's how we're looking at it, Greg.

I guess just pivoting to the title business, just watching with interest the growth in your commercial book, maybe you can just give us a sense of how that is looking for the balance of the year, especially in the context of all these big data center infrastructure projects, et cetera. Carolyn, I'll let you speak to that one if you would.

Sure. Greg, we really expect to see commercial continue as it has already this year. Data centers are pretty big, but with the data centers that take all the title companies, we're all on all of those and we all have a piece of them. But what we're seeing a lot of our agents are just really a mix of other industrial projects, you know, hospitality.

It's been a real mix, so that gives us, you know, pause to think that this will just continue through the end of the year. So, it's not one thing that's going strong right now.

Yeah, sure. Sure. Sure, Paul. So, you know, at the end of last year, you'll recall we raised the 20, 25 accident year loss pick in the fourth quarter, even though we were putting up favorable prior year development because of our conservative approach. Recall, we saw trends lost severity trends specifically.

Through our case reserves increasing. So, we took a conservative view and it raised the 20, 25 accident year. So, hand in hand with that, when we went in to 26, we said, well, you know, we're going to take the same approach and put up a bit of a higher accident year.

Loss pick for 26 because we saw those trends emerging through at the end of the year. And so we did that. So, if you look at where we were at the beginning of 25, when we put up the accident year pick and then we ended up increasing it a bit by the end of the year. When we got to 26, we said, okay, let's just be conservative and put up a bit of a higher loss pick for 26 as we go in.

And as we move forward, as you know, we hold our loss picks once we put them up for two or three years on commercial auto, longer on workers comp and general liability. But those prior years are developing favorable, favorably indicating that, you know, that we are coming in line with what we want to happen and that is, on average, produce a couple points of favorable prior year loss reserve development.

Yeah, sure. So I'll start and then hand it to Frank as well. We're, we're still looking at share repurchases as a way to return capital to shareholders. And we're still in the process of repurchasing shares.

And throughout the year, we would expect to continue to do that. Again, we're opportunistic. We look at where we're trading and we're very mindful of being deluded to book value for share when we make those repurchases. So, opportunistically, we will continue to make repurchases with those factors in mind. And then as always, we get toward the end of the year and we look at where our capital position is. And if we're still in a position where we think we have excess capital, we'll still consider issuing a special dividend.

And the only thing I would add to that is this quarter had a little nuance of we were issuing shares related to the ECM acquisition. So we were staying out of the market while that was taking place. So that was another wrinkle in the quarter.

Yeah, so Paul, I'm happy to hopefully fill in a little bit of that. The, you know, Frank talked about the direct written premium, about 220 million last year.

And ECM has the exact same combined ratio targets that we have for every one of our other companies, and that is somewhere between a 90 and a 95. And I can tell you the first two quarters of this year, they have produced very strong combined ratios stronger than the prior years. So our expectation of ECM will be that they produce combined ratios between 90 and 95 over the course of time. And, you know, as far as the overall growth and premium, they had a photo share in place.

So their net premiums were a lot less than the direct, which is why we mentioned the direct premium. So we're currently working on including ECM and to our corporate treaties, and we will eliminate the external quota share or already have effective July 1st. So hopefully that gives you a little bit of color on how we're thinking about ECM when it comes to hotline and bottom line.

Thanks, Paul.

Yeah, the, the ruling obviously put more burden on freight brokers and the freight brokers. Therefore have more liability exposure than they had in the past. We ensure that the truckers, the long haul truckers, not freight brokers. So, you know, to the extent that the freight brokers will try to work with higher quality.

Companies given that they now have liability exposure. We think that might bode well for us in that we think that the truckers and the companies we have in the Great West portfolio are higher caliber. And so to that extent, freight brokers trying to work with insurance that look more like our insurance. We think could be a good thing.

Of course, freight brokers will on the flip side, you know, they're going to try to transfer as much of that liability as they can. But, but for us, we're, yeah, it's not the freight brokers that we're ensuring.

Yeah, great question. And then I'm actually very happy you asked it. The answer is yes. You should expect it to continue. And that's good news. We have a couple of large significant partnerships that are that we're growing with. And, and that's why we tried to take out some of the noise around that growth. We didn't want to try to overstate the growth in that written premiums because of that nuance with that business. So that's why we gave, you know, the referred to the 1.6 number. If you take that noise out, but that will continue to be there as we grow.

We are very happy about these new partnerships auto warranty. As you can tell from our supplement performs very well for us. And it's a business that with with the ability to increase scale as we are. It'll be a very profitable segment for us, but it's going to create a little bit of noise and frankly we're having some discussions about as that grows. Is there anything else we can do to make sure we're we're being as transparent as possible on that business and not not confusing the numbers with its inclusion, but it will continue.

Thank you.

Okay. Well, just very brief closing. We want to thank everybody for participating. We want to wish everybody a happy summer. And we feel good about the prospects for the third quarter this year. As I said, fundamentals are very valid and especially insurance and prospects are looking brighter and title insurance.

So we'll see you back here after the third quarter and update you again. Thank you very much.