Old Republic International (ORI) Q3 2026 earnings call transcript

Thank you. Good afternoon everyone and thank you for joining us for the Old Republic Conference Call to discuss 3rd Quarter 2026 results. This morning we distributed a copy to the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at OldRepublic. com. Please be advised that this call may involve forward looking statements as discussed in the press release date at October 22nd, 22nd, 2026. Assumptions and certain indies and risks exists that may cause results to differ materially from those set forth in these forward looking statements. For more information on these assumptions and certain indies and risks, please refer to the forward looking statements discussion in the press release and the company's other recent SEC filings and the risk factors discussed in the company's most recent Form 10K and other recent SEC filings.

You may also include references to net income excluding net investment gains for net operating income, a non-gap financial measure in our remarks or when responses to questions. Gap reconciliations are included in the press release. Presenting on today's conference call will be Craig Smitty, President and CEO, Frank Sridhar, Chief Financial Officer, and Carolyn Monroe, President and CEO of Old Republic's National Title Insurance Group. Management will make some opening remarks and then will open the line for you questions. At this time, I'd like to call on the call over Craig. Please go answer.

Okay, Joe, thank you and good afternoon dollars of consolidated operating income and that compared to 248 million in our consolidated combined and that compared 95 annualized return on beginning to stand at identical to last quarter and for the first nine months of the year both in book value for sure including dividends, stands at we continued to benefit from reserve development in special insurance, annual insurance, and we think this continues to reflect our writing and reserving discipline. And as usual, Frank will provide more detail on reserve development in a few minutes. Especially insurance, net premiums earned were nine points premium growth. Freshly produced 204 million of pre-tax operating income and that compares to 208 million with a combined ratio of 96 which were 0.8.

Freshly competition remains active across much of the marketplace although conditions do vary and legal system abuse continues to put pressure on severity liability lines to cover. Frankly, those in top premiums and fees earned were 7% higher operating income and ratio of 96.1 compared to 96.4. So while continuing to produce solid results, the recent increase in mortgages rates does create some uncertainty regarding transaction volumes as we go forward. But we think our our title business has demonstrated over many decades and ability to remain profitable and adapt through a variety of housing and mortgage rate environments.

And of course, we'll provide additional perspective market and operating results later in the call. So with that, Frank, I think I'll turn the discussion over to you and then you can turn it back to me to discuss specialty and we'll follow that with Caroline who'll discuss.

Thank you Craig and good afternoon everyone. This morning we reported net operating income of 181 million for the quarter compared to 197 million last year on a per share basis comparable quarter over quarter results were 73 cents compared to 78 cents starting with investments. Net investment income increased 1.5% in the quarter. However, if you exclude a few unique investment charges, net investment income would have increased by about 4%. The increase was due to a larger investment base partially from the timing of our debt refinancing and to a lesser extent higher bond yields. Our average rate on corporate bonds acquired during the quarter was 5.4% compared to the average yield rolling off of about 4.4%. The total bond portfolio book yield ended the quarter at nearly 4.9% up about 10 basis points from your end.

Turning now to loss reserves, overall the consolidated combined ratio in the quarter benefited 1.1 points from favorable development compared to 2.5 points of benefit last year. This was a result of higher favorable development from title insurance and a lower level of favorable development from specialty insurance. Now why the level of favorable development from specialty insurance was lower than we experienced in recent years. It is within the range of our expectations relative to our long-term target. Now digging into specialty coverages, property continued to have significant favorable development that was higher than prior year. Workers' comp had a solid level of favorable development but was significantly lower than what was experienced last year. Commercial auto and favorable development that was in line with last year, while general liability and financial indemnity had elevated levels of unfavorable development.

We ended the quarter with book value per share of $24.65 which inclusive of regular dividends represents an increase of 5.7% since year end. This increase resulted primarily from solid operating earnings and the impact of the bargain purchase gain on the ECM acquisition and that was partially offset by lower bond valuations related to the current interest rate environment.

In the quarter we paid $76 million in dividends and repurchased $114 million worth of our shares. Since the end of the quarter we repurchased another $60 million worth of our shares and that leaves us with about $460 million remaining in our current repurchase program. I'll turn the call back over to Craig for discussion of specialty insurance.

Okay thanks Frank. Especially insurance net premiums written were up 10.5% in the quarter. However I indicated earlier to give you a little more color around that. That figure includes ECM for the first time and also strong warranty business. So if we exclude ECM and we exclude business net premiums written were up 4.4% in the quarter. So we think that's a growth rate that aligns with where we're at in the PNC underwriting cycle today. We saw some rate increases on commercial auto and general liability and I'll talk about both of those lines individually in a moment.

And our overall retention ratios came in as expected and in line with the second quarter. So to provide some more color around our auto warranty business just want to remind everybody that Old Republic participated in this market for many decades through vehicle to contract programs with auto dealers and administrators. And recently we made a strategic decision to increase our presence in that market by partnering with market leading administrators with capabilities that align well with Old Republic's capabilities. Frankly we view this business as an attractive source of growth and diversification because its performance is less driven by the PNC underwriting that we see with administrators and the quality their underlying progress mentioned in my opening remarks.

Separating income was 204 million while the combined ratio was 96%. The lost ratio for the quarter was 64% which included 0.8% point the favorable prior year lost reserve development and that compares to 63.5% the third quarter last year when we included 3.4% of favorable development. The expense ratio for the quarter was 32% compared with 31.3% in the third quarter last year. As you saw in the release we began to provide an additional combined ratio analysis excluding the impact from the retail write-up portion of our warranty business. We did this because we reached an inflection point where the impact on the expense and loss ratios from this portion of our auto warranty business started to become more material due to the significant growth in those programs.

This exclusion as you can see in that supplemental exhibit the expense ratio was 29.9 compared to 30.2% in the third quarter of last year.

There's also some additional items here to note and that is that there was a 20 million dollar credit charge in the quarter increased the expense ratio by 1.4 percentage point while changes in missed decreased the expense ratio somewhat in the quarter. And if you're comparing to the third quarter of 25 as a reminder there was a true up of seating commission in that third quarter of 25 that increased our third quarter of 25 expense ratio by 0.9 percentage point. So some moving piece turning to commercial auto net premiums written were up five seven percent while the loss ratio came in at 71 percent compared to 68.3 and the third quarter last year.

Loss trend continues to be impacted by legal system abuse and as we continue to closely monitor this trend as we have for for many years now we also continue to maintain our risk selection and pricing discipline when it comes to commercial auto. During the quarter we achieved rate increases commercial auto in the mid teens which remain above our view of observed and anticipated loss trends. At the same time retention ratios remain stable near 80 percent. So we think these results reflect the market that is rising action. We continue to become favorable prior and in favorable reserve developed historical underwriting as this is greatly cautious. In commercial transportation market we continue to vary. Conditions are probably most favorable for largely particularly those operating one to five units face greater economic.

We serve the full spectrum of commercial transportation market. We're able to observe conditions across range of operators and adjust our pricing and growth strategies.

Market's compensation net premiums written were up in the quarter while the loss ratio came in at 62.7 percent compared to 63.8 in the third quarter last year. In the quarter we gave up rate in the low single-digit range on workers comp because as severity trends remained constant frequency trends continued to decline and wages continued to increase. So here as we think our rates remain adequate relative to these loss and exposure trends that we're observing. Moving on speaking we're very pleased to absolutely close the E. M. E. C. M. transaction this quarter as we noted in the release was a creative to book value per share and earnings per share and our newer startup operating companies continue to make good progress.

Although these businesses are still relatively small if you look at it in the context of old republic collectively they have grown approximately 40 percent year to day. So thus that's that the investments we've made over the past several years are gaining traction and will continue to contribute more meaningfully as we go forward.

So overall we continue to see a competitive PNC marketplace and we remain focused on cycle management and pricing that will continue to produce possible.

Thank you Craig. Title reported premium and fee revenue of 823 million for the quarter an increase of 7 million compared to the quarter of 25. Interest rates remain elevated throughout the period and moved modestly higher following the federal reserve September rating increase. Despite the higher rate environment our title operations delivered solid growth driven by continued strength in the agency channel where revenues increased 9% compared to third quarter of 2025. Revenue from our direct operations was flat compared to the prior year period. Commercial premiums represented 24 percent of premiums earned during the quarter compared to 26 percent in the previous year period.

We continue to see a strong pipeline of commercial transactions with a diverse mix across many segments of the commercial real estate market. Agency generated premiums represented 81 percent of title revenues during the quarter compared to 80 percent in the third quarter of last year. Our loss ratio improved by 60 basis points this quarter compared to last year driven by higher levels of prior year favorable development reflecting our consistent and conservative reserving practices. Our expense ratio of 94 percent was up slightly over the 93.7 we achieved in the third quarter of 25. The growth in our agency business increased our agent commissions and contributed an additional 1.7 percentage points to the expense ratio as agency revenues represented a larger share of our title revenues.

This increase was substantially offset by a 1.4 percentage point improvement from our continued focus on operational efficiency and disciplined expense management resulting in a quarterly combined ratio of 96.1 percent. Year to date our combined ratio has improved to 96.9 percent reflecting continued progress toward our long term objective of achieving a combined ratio below 95 percent. Investment income increased marginally in the quarter. All these items produce pre-tax operating income for the quarter a 50 million up from 46 million in the third quarter of last year.

As we move into the final quarter of 2026 we remain focused on improving operational efficiency and expanding our margins. A key part of that effort is our partnership with qualia 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 long term success.

Thank you and I'll now turn it back to Craig.

All right. Thanks Carolyn. So the fundamentals and specially insurance remain strong as we navigate a competitive PNC marketplace and our focus continues to be on cycle management and rate adequacy to achieve any questions either our last question or Frank or Carolyn for some help.

Thank you Greg and the short answer is yes you can expect a continued lift from here on out within the auto warranty business is going to continue at a less pace and ECM will continue to contribute to top line and bottom line as we go through the subsequent and came to being is initiative on several fronts we expect then ECM was there need to have a quota share in place so we no longer have that quota share in place so that too will add to the net bottom line as well so continued growth in both of those specialty and loss ratio expense ratios will continue to provide the the supplemental information so you can see things with and without.

To the to the loss that needed be under the gas account these are high types of events for a managed collateral servatively and in this case there was one unique performance and it was in a collateral deficit position that we have as a so I've been able to I've been unable to position and what we believe to be the ultimate loss for that program assuming no recoverables beyond the collateral that we have and so we don't expect that to have any further developments and we don't see this as a situation about with regard to the the overall focus a little bit more is our after we exclude the because it I said in my opening comments it's just hit an inflection point where it's it's material to the reported expense ratio and and having a level set on where things would look like if we weren't growing that business I think is is at least how we look at things here so if you look at the expense ratio for the first nine months without that retail business so I think the if you you know those other things like credit loss I think the nine months year to date including the the auto warranty right up our our more in line with where things believe will be as we move forward I think I've said we are working very hard to try to keep that below a 30 and we will continue to do so well those are my two questions I'll make you for follow thank you as a reminder if you would like to ask a question please press star one to raise your hand and please pick up your handset when asking a question to allow for optimum sound quality your next question is from the line of Paul Newsom with Piper Sandler your line is now open please go ahead good afternoon thanks for the call guys good evening I'm all the the ECM and the mortgage businesses it is fair to assume that those businesses had an improvement or deficit of on the combined ratio are they are they having an impact on the bottom line for the combined ratio or is it just just a knee jiggery of loss versus expenses the the ECM is is producing results that are right in line with our target results so make the assumption that that will be the case going forward so far this year they have right within that range and we've had limited weather activity than usual within our portfolio had very good weather and as such are having a very we expect to continue down that path I was hoping to ask maybe a bigger picture question where we can kind of step back Craig and think about sort of the company within the overall property kg cycle and probably we're talking about special commercial obviously that's the title and you know where you are from a profitability perspective and how you think that that profitability will evolve over the next couple of years with the you know current you know pricing soft market and because we're in the combined ratio sort of even if we pull out the called excess expenses related to the efforts to to have a whole bunch of new businesses which are great for the future it looks like we're kind of top of the range from the other way from the combined ratio perspective you know if the goal is to get back to some place in between the goal how does that work out from a cycle perspective do you think we had a few little patient maybe a go above the range for a bit before we can get into kind of a normal position or do you think there's some other things that could happen along the way given we are from a big picture perspective and I'd like to not ask about the quarter per say really the years sure sure I appreciate understand it yeah I think you know we're within the year hopefully we'll be within our range for the year we've been looking back I think some you know our overall philosophy is again be between that 90 and 95 depending on where we're at in the cycle right now it would appear we're at the top end of that and we're going as we market in the next few and we're currently in the price of planning with each of our companies 21 different operating companies and putting together plans and making realistic assumptions about rate pressure you know our as we move through the next few years of a soft market that's what we're going to work hard to do the big very to all of I mentioned focusing discipline and that's real top line in the cycle it could driven by the expense ratio but we're keeping an eye on expenses we're doing everything to maintain a profitable loss ratio and you know we're sticking with our target that in the softest part of the cycle we want to be at a 95 or below we're thinking about it I indicated in my remarks and and and trying to be priced competitive is selling our value proposition that's why we're diversified in and decentralized into the specialty niches that are an inch wide mild deep we hope that our distribution partners and our customers are viewing us a as a value that we can sell our specialization and and the services that come along with that we think we'll we will come out the other end stronger at the end of the day going to stay focused on bottom line and and top line could suffer so far as I indicated even if you look at commercial auto you know it appears the market's rational we're able to get rate increases in the mid teens on commercial auto rate increases in the mid teens on general liability and that's going to be our focus is rate adequate pricing and we'll see what happens with the top line but so far you know we've been able to do okay on the top line and and as I also mentioned our new startups are starting to produce some meaningful premium that will give us a bit of a tailwind on growth right now those startups are are driving up the combined ratio because of the lack of premium relative to their expenses so the more that comes into balance and and the premium growth continues to to move along and those startup entities you know that should help with again some tailwind on on top line even if our some of our other businesses might have to shrink a little bit so absolutely thank you very much thank you Paul as a reminder if you would like to ask a question please press star one to raise your hand and please pick up your handset when asking a question to allow for optimum sound quality your next question is from the line of Gregory Peters with Raymond James your line is now open please go ahead hi hey Craig can we go back if I look at the supplement for the specialty insurance segment and I'm focused on the home and auto warranty portion and you give you give the net written premium and I'm looking at year-to-date numbers of like 545.9 which is up materially from the 350 the year ago what is this what is this what are we what is this book look like is it a this is a seven hundred fifty to eight hundred million dollar book is that where we're headed or is it going even farther than that you ask things are progressing very let me clarify driven by warranty even though we do put those two together but warranty is is significantly and and even on a net basis you can see the growth you pointed out we expect looking at it on a you know yeah and even higher so wait 600 million of annual premium or annual premium premium and and then I guess just go to the title business for a second you know with rates moving up a little bit the feel good for the real estate market and feels like there's pressure on forecasts going forward I'm just curious if you have any different views on that from that view on that position and relative to how you see your book of business performer and that is coming in and robust we have the of the hand in the residential interest rates major turning point for us and now we're talking about in front of 30 year mortgage risk holding up very we continue to play a very significant role on on that business and the only other thing I would point out and would echo is that we're seeing right now you know we have a a uh entitled the entire country points in time we're direct getting indicator of where residential is going we we would not say that right now we would not say that it's a good leading indicator because we're seeing um too big of a of a delta between geographies and and there and we're very limited in our geography on direct so it's uh residential is is driven by our agency and depending on which marketplace you're talking about some look look pretty decent and others not so much so you know it's it's residential and certainly uh your mortgage rates are not helpful but hopefully uh by the time commercial hopefully back into the end um residential will pick up again I would point out to reify not a big reify move the needle thank you for that detail there are no further questions at this time I will now turn the call back to management for closing remarks okay well we um very much appreciate all of your attention and participation in in today's call and we're looking forward to our call next quarter where we'll be able to report results and uh we remain optimistic that um given all things we've discussed today that some good news to report um in final quarter so involvement again thank you this concludes today's call thank you for attending you may now disconnect