Q4 2019 Earnings Call
Welcome to the old Republic International fourth quarter.
Earnings Conference call.
Last question <unk> conference call restricted by pressing star one on your telephone.
I would like to remind everyone, but this conference is being recorded.
Sure.
And.
Please go ahead.
Thank you good afternoon, everyone and thank you for joining us for the Old Republic Conference call to discuss fourth quarter 29 Cade results. This morning. We just started he did a copy of the press release and posted a separate statistical supplement, which we assume you'll have seen andorra otherwise have access to during the.
Paul most of the documents are available at old Republic's website, which is www dot old Republic Dot com.
Please be advised that this call me involves forward looking statements asked ourselves in the press release and statistical supplements dated January 20, Threerd 2020 rest associated with these statements can be found in the company's latest FCC filings.
This afternoon's conference call will be utilized by Al Zucaro Chairman of the board of Old Republic International Corporation, and several other senior executive members as planned for this meeting at this time I would like to turn the call over thousand Carl. Please go ahead Sir.
Okay. Thank you, Maryland, and welcome and good afternoon.
Everyone.
For this 2019 second thing else and.
Full year earnings conference call.
Oh, well have to say that up in the interest of full disclosure.
Oh I need to note that.
This will be all delay Oh cool then I'll be on as a part of old republics a management team.
As we announced a in the spring of last year.
Turning to over the time to Craig Smiddy, as we became CEO of our Oh, Venerable Old Republic company.
And that took place in effective October 1st 2019.
And at that time, we know we split for the chairmanship and the CEO positions.
And as a result, we've got we've we've got a we've established a good transition period during which.
Other Ceos position as.
Our chief Enterprise risk manager, Oh that that transition can take place Oh in a flawless manner.
Oh, Yeah Thislife. Therefore, we he agreed that I would participate in some manner on this call Oh since I was at the home of the company for a for three quarters of the year and Craig took over for the final quarter of or the years.
Of course, so the manner in which I will participate decided.
After these few words is to turn our discussion over two or three or three of our most senior.
It is that the head of our organization.
<unk> Oh that's.
Paul Miller.
Yeah. So.
Craig Smiddy, or CEO , and Rande Yeager, who was the executive chairman of on title.
Oh insurance group.
Having said this I'll now turn a as you call.
To address some financial matters and then a call will be followed by Craig Smiddy will speak to the overall consolidated results. In addition to whatever color will be covering and our general insurance group of which Craig is also CEO .
And then Ah Craig will be followed by a Randy Yeager as I've said is the executive chairman of our title business will go over happenings in that business.
There are finished ive a few closing remarks.
And as there's already been said, we'll turn the meeting onto any questions that Oh any connected participant may have.
So here's the Mike cool.
Thank you Alan good afternoon, everyone.
As usual I will comment on a few key elements of our financial results for the fourth quarter and a this fall.
This morning, we announced fourth quarter net income excluding investment gains and losses.
87 cents per share or.
43.5 million, which is up.
4.9% from the final quarter a year ago.
For full year 29 teams net income again, excluding investment gains or losses.
Because the dollar 84 cents per share.
554.2 million.
Which is essentially flat with 2018.
These earnings produced a 10.8% return on beginning equity for 2019.
And you compare that to an 11.8% return for 28 chain.
From a growth perspective.
Net premiums and fees are.
Grew by 11.4% in the fourth quarter.
To 1.6 billion.
This was largely driven by our title slate.
For the year.
Premiums and fees grew 5.1%.
This was attributable to both our general insurance.
As well as our title operations.
Which more than offset the expected decline.
The mortgage care to write off business.
That investment income grew by 2.3 and 4.4% for the fourth quarter.
And for the full year, respectively.
As a larger invested asset base.
Greater dividend income that was attributable to higher.
Higher yielding equity portfolio.
Offset a slightly lower yields on our boss.
From an underwriting perspective, this year's fourth quarter.
For your consolidated composite ratio.
95.1%.
What's substantially unchanged from 2018.
On a year over year basis.
The claim and expense ratios.
Also remain relatively consistent.
Fourth quarter claims ratio however.
Trended lower.
The expense ratio ticked up work.
That's primarily due to a mix of business shift towards the title operation.
Which as you can see operates with a lower loss.
And higher expense ratio.
Turning now to the balance sheet total cash and invested assets increased by 10.2% to 14 and a half billion.
At the end of 29 team.
The change was driven by combination of strong operating cash flow.
Which totaled $936 million for 29 chain.
As well as substantial unrealized market appreciation.
For both the fixed income.
Equity portfolios.
Composition of the portfolio remains relatively consistent compared to year end 2018.
Whereby 72%.
Allocated to cash in bonds.
And the remaining 28% to equities.
And that portfolio continues to focus on high quality long term dividend paying companies.
Consolidated basis claim reserves developed without significant favorable or unfavorable development.
2019th.
And that's compared to favorable development for 28 teams fourth quarter at four year.
Of 2.4 at 1.4 percentage points respectively.
This mornings release, all the pages four and five of the financial supplement.
Provides additional details starting part of your claim reserve development.
On a reported claim ratios for each of our segments.
Older public book value per share increased to $19.98.
Up 16% for the year.
Inclusive of all our regular quarterly dividends and the one dollar per share special dividend.
That was paid in the third quarter.
Last year, the total return on beginning book value.
Amounted to just a little bit above 26%.
That's a special dividend was evaluated in light of capital adequacy and liquidity needs.
Long with the anticipation of withdrawn capital from our run off mortgage guarantee operations.
I will say with the regulatory approval.
We currently expect to receive a return of capital.
Totally $150 million from this run off business during the course of 20 Twond too.
Looking ahead with respect to carry on my operations.
We continue to proceed along the lines that we previously disclosed.
We've said that the options available to US include a continued profitable run off for the business over the next several years.
Or alternatively a.
Reactivation of the business under new ownership.
We're finally, a reinsurance or the remaining book of Inforce policies.
We continue to assess all of our options.
In the interest of producing the most beneficial long term outcome for all stakeholders.
So overall old republics balance sheet remains very strong condition.
As well capitalized.
Well positioned for future growth.
So with that I'm going to turn things over to Craig for some additional commentary.
Okay.
So as the result, Karl covered demonstrate our strategic diversification between our title insurance business and our general insurance business works very well for us.
The uncorrelated nature of these two businesses helped produce steadier earnings for all our eye overall, which is underscored by some of the figures Carl reference I'll reiterate a few of those the 95.1 composite ratio the 10.8% return on equity the 16% increase.
In book value per share and including dividends a total return on book value up 26% all for.
The 2019 year.
So specific to the general insurance group as the release syndicates and as we show in the financial supplement.
The group's mid single digit growth quarter to quarter and year over year in both.
Net premiums earned and in total operating revenues.
Quarter over quarter operating income was relatively flat while year over year operating income was up 1.7%.
Net premiums earned and commercial auto rose by 6% year over year.
And this mostly reflects the positive effect of the rate increases that we've been achieving in this line that currently stand at the high teens for the 2019 year.
However, premiums have been somewhat offset by a decline in the exposure base due to lower U.S. freight shipments in 2019 compared to 2018 [noise].
[noise] as can be seen in the financial supplement workers' compensation experienced a 1.9% drop in net premiums earned year over year and this is mostly resulting from rate decreases.
And for 2019 those are in a low single digit.
And those rate decreases corresponds with lower claim frequency trends that we've seen in the past several years.
Quarter over quarter. The group's overall composite ratio rose slightly to 98.8 from 98.5, while year over year. It stands at 97.5 for 2019 compared to 97.2 for 2018.
[noise] the group's fourth quarter expense ratio came in at 25.8%, while the full year 2019.
The expense ratio came in at 25.7% up from 25% in 2018.
This higher expense ratio went 2019 is largely due to differences in the mix of business.
For example, a workers compensation writing says we just spoke about are less than they were.
And that typically comes with a lower commission rate. So that's what we mean by differences due to mix of business.
Turning to claim ratios our fourth quarter.
Commercial auto claim ratio came in at an elevated 91.3% with the year over year ratio coming in at 84%.
The systemic increases in claim severity trend in the U.S. commercial auto line continue.
These are from the same underlying causes that we spoken about now for.
Several quarters, and we will continue to respond.
Through rate increases risk selection, accompanied with a better levels up technology to help us in that risk selection and we'll continue to to perfect.
Yes until such time, we see this claim ratio come back into line with our target which remains in the low seventies.
Turning to workers compensation, the fourth quarter claim ratio declined to 57.4% from 67.5% quarter over quarter.
And year over year. This claim ratio declined from 70.7% in 2018, 63.2% in 2019.
And obviously, we remain very pleased with this is improving resolved in workers' compensation.
General liability experienced an elevated claim ratio quarter over quarter end year over year.
But at this a case we.
I have said in a path we write less premium in this line of coverage so results tend to be more lumpy or volatile quarter to quarter and year to year.
For a commercial auto workers comp NGL combined.
Given that we typically provide these coverages together to an account.
Quarter over quarter claim ratio increased by 2.2 percentage points, while year over year. This claim ratio held relatively steady.
Still looking at the financial supplement we know that a financial indemnity claim ratio quarter over quarter end year over year dropped significantly.
Coming back into line with our targets and we think this improvement reflects actions that we've taken to address the higher incident.
Guaranteed asset protection.
GAAP claims as well as the higher incidence of of Dino claims.
That we experienced over the last few years and and as we spoke about.
Prior quarters, we were taking some fairly aggressive action.
In those regards.
All the claim ratios we report of course free.
Our inclusive of favorable went out in favorable development and then the latest quarter. We saw a unfavorable development of 2.9 percentage points, mostly resulting from commercial auto.
While year to date, the the development was unfavorable by <unk> 0.4 percentage points.
So again speaking for that the general insurance group, we continually seek to selectively grow our business make investments to sustain long term growth and profitability, while proactively responding to loss trends that we're seeing.
Underwriting profitability remains Paramount and there's a keen focus.
In improving our claim ratios, particularly our commercial auto claim ratio.
So on this note I'll turn the discussion over to you Randy for comments on or I title insurance group.
Great. Thank you Greg appreciate.
Of course, as we reported this morning title groups quarterly and annual results were very good.
In the fourth quarter, we set an all time record for underwriting revenues of $717 million.
For the fifth consecutive year in six of the last seven.
We surpassed the 2 billion dollar Mark for total revenues.
Last years, 2009 teens 2.53 billion.
Number is an all time high.
Favorable.
Prior year claim development continued during the year, albeit at a slower pace.
See past few years.
But backing out these adjustments records were set for both quarterly and annual pretax profitability, we surpassed 200 million.
Pre tax operating profitability for the fourth consecutive year.
Looking at the market when the dust settles.
Residential mortgage originations are expected to be up about 23%.
Uh huh.
T over 18 exceeding two trillion for the year.
Refinances accounted for almost 40% of that told we're about 70% higher than in 2018.
The latest mortgage bankers Association estimates call for similar origination markets and in a 2020 with refinances down moderately and purchases up slightly.
On the commercial side of the business, India predicts that.
A new record of 628 billion will have been establishing to 2019.
And their optimism actually rises and 2020.
As or projections inquiries about 9% into a new high of 683 billion.
Certainly all of this is good news and would provide for a healthy marketplace and 2020.
Our market share a indication last last was a 15.1%.
And.
When the final numbers are tallied I think that number will hold for the year.
For 2019, our agency premiums were up about 5%.
Direct operating premiums and fees were up about 12%.
Our commercial title operations continue to perform at a high level with a title premiums from the source commercial accounting for almost 20% of or total premiums.
We believe that our offerings of commercial and residential services are of course in the non in terms of underwriting expertise and customer support.
Over the years, we've enjoyed a great deal of success and the title group.
And like all the other or I business units, we emphasized integrity expertise and culture.
I'd like to say that were steady as it goes and we stick to the basics, we're not chasing market share and don't try to buyer weight of the time our acquisitions.
When we make some have strategic value in terms of where they are the geography in or People's intellectual capital.
And our reputation is for professional services.
Our success when you look back but it all together as a byproduct of a job well done and all of these regards so that's my report on the title business and now I'll turn it back to you al for <unk>.
Any closing remarks, you man.
Okay.
As my three.
Colleagues.
And just reported.
This continues to perform.
Very well.
Last year.
By the way, we posted the highest pretax earnings in the entire history along company.
And.
As always.
We are managing all way.
As you go away out of a few parts of the general insurance business in particular withdraw and have been experiencing some temporary.
Pieces of pickups, if you will.
But we see the size.
As part and parcel of what we do.
And what we do in terms of the underwriting risk management process.
That oh people from top to bottom.
Well equipped to deal with.
Throughout the cycles of our business.
It's gonna said, both the or by holding company and at the most critical insurance operating levels.
We are very well capitalized to at once supports the obligations on the right side of our balance sheet.
Too.
Protect the capital account.
Half of all.
Of our stakeholders.
Three.
Maintain sufficient dry powder always to contain the possibility of negative eventualities and as well provide for the strategic growth <unk> company.
Both organically.
And that's true.
Well thought out.
External additions.
I believe that we have put together over the years and have now a fortress balance sheet.
That were in into top shape to do all of this always with.
Was the style that old Republic has been known for all in all the years ahead.
So on that note.
I think this is a good time.
To conclude and to open up a visit.
Two.
Questions that.
Participants may have.
So there you bill.
For.
Investors participating in this call on the interest in line.
Keith did just one on your telephone keypad staff the question.
If you are using speakerphone. Please make sure your mute function is turned off.
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Oh, So if you press star one earlier during today's call. Please press star one again to ensure our equipment has got <unk>.
We'll pause for just a moment Tonight.
You need to signal for questions.
We will now take our first question from Greg Peters of Raymond James. Please go ahead.
Good afternoon.
Alex.
I've enjoyed.
Our 25, plus year Association and I have to say.
It's gonna be surreal to not have your participation in these quarterly conference calls going forward. So good luck in your retirement.
Thank you.
Pivoting to.
The results of your general insurance segments.
I was looking at the table on page three that you talked about their comments.
About the claim ratio for the fourth quarter or for the full year or and I was looking at the.
Claim ratio, excluding the prior period claim reserves development and the fourth quarter 2018, It was 75.9.
And then the fourth quarter 2019 70.1, sorry.
500, plus basis point a improvement.
In underlying claims ratio and then I'm trying to reconcile that with what is going on in your commercial auto in general liability business, where.
Looking at the table on page four.
Just a statistical supplement.
Your saw him.
Frankly, some of the highest loss ratios and commercial auto in general liability that I've seen for your company in a long while.
Maybe you could help.
Put those pieces together so I can.
Think about your outlook in a more measured basis.
Sure Greg I will try to address that so I think what is is come through here obviously is that.
The unfavorable development.
That that we saw.
Is driving.
Those <unk> those higher loss ratios.
That you speak about in the financial supplement.
For for the current year.
We feel very confident in the.
Yeah, the loss rates that ratio that we have a.
Listed there and.
There are mix of business changes that that impact that.
Some of the business with lower loss ratios has increased proportionately and as I spoke about earlier a workers compensation.
Has as you had less writings there.
So that's that's an example, where.
Even though our current year loss ratio is higher than the reported loss ratio.
It it.
Creates those kind of.
The differences that years that you're speaking about but.
Again, you can.
I assume that the higher loss ratios that you're looking at.
Our resolve that some unfavorable development from from prior years that we're getting caught up with as some of that severity has come through.
Okay.
Appreciate that comment and I understand your business fix this year so and.
I guess this speaks to loss picks up the loss picks for prior years was.
Were too low or you had to adjust some interest costs in the question about the loss picks for the current year in light of this news that rising severity environment. If those those are set at the appropriate levels.
Yeah. It's a fair question again, I would reiterate we feel very comfortable with with those.
You know we have spoken about the compounding effect.
Of of rate increases year after year and that gives us some comfort.
In that in that loss pick.
Right now for example, D N O.
Great increases our on primary D. N O are in that 30% range on excess the an hour and the 60% range that's consistent with what some other.
Market.
Place observers have reported as well on our aviation business.
Right now are.
Loss or excuse me our rate increases there are a are very strong and are in the 20 plus range. So when we look at those kind of rate increases.
They have to have an impact on on the current here and future years and.
Therefore.
We do feel confident about that and on the other hand.
The severity that has come through particularly on auto has demonstrated that the picks we had in.
Years were we didnt, yet have those kind of.
Benefits from from rate.
Coming through.
That's where we're experiencing some of the on favorable development.
Thank you.
Maybe just one other piece of general shorts, another I'd like to ask Randy a question if it's okay.
The expense fishes side.
You need it was up for the quarter versus quarter over quarter, I think part of it I mean its business snacks.
But it's also up for the full year and Al you know I know you you've talked about that range game in the 23 to 25 area.
Craig you know I feel like.
You know you guys are are a very interested in seeing that lower can you talk about some of the.
Levers you might pull over the course of next year or two to drive a lower expense ratio.
Yeah sure well the easy one is as as premiums grow and we don't increase our our fixed cost our staffing costs.
That will obviously probably lead be the biggest contributor yeah. When it's when you see for instance, our work comp premiums coming down.
And your expenses for that line.
Tend to go up at least your your all your fixed expenses.
So I would also point to our commercial auto I made the comment that.
We've seen an offset there on premiums because of lower.
Cost or excuse me lower Ah.
Trucking revenues in general Len and lower amount of miles.
Driven by trucking companies shipments were down so as that returns we can expect our topline two to grow without necessarily growing our our internal costs.
We are taking a look at at commissions in general so.
Specifically on lines that may not be performing as well. So that's that's another area. We're looking at.
The the thing that we don't want to do is.
Starve, our south of investment you now we do have.
Currently some investments in some newer startups that that we've engaged in.
Our residual market business for instance is a new business that has yet to produce premiums and we'll do so.
Beginning in 2020, and and that'll come on a very quickly, but we consider that it investment and we've been carrying that expense and our.
Our other operation our specialty.
Insurance underwriters operation is in a similar position.
So as those investments pay off.
And start to produce the kind of results we we expect.
We will see some improvement there, but what we what we don't want to do a star of ourselves necessary investments in technology for instance, we made some pretty significant investments in technology to.
Improve our ability to analyze claim data and and improve our underwriting techniques and and I would tell you that our analytics are much better today than they were several years ago and and we continue.
To invest in data Cros.
Our enterprise and we don't want to starve ourselves there either so.
All of those things together.
We think I'm still we need to maintain that 23% 25%.
Target and it remains our target.
And as things.
Shake out in 2020, we will certainly keep an eye on expenses and.
And if necessary a take further take further actions.
Okay.
I would have more questions, but I'm sure. This alert people that are going to ask so I'll defer to them saw the title insurance piece Randy.
Can you give us sense of how the commercial component has grown over the last year or two relative to where the market share is and if you still think your.
Your opportunity going forward as a net market share gain where you'll go faster than the market.
Yeah, I'm speaking on the commercial side of the title business Yeah.
Thanks for.
Yeah I agree we've got tremendous rose from the commercial side of the business, it's about 20% of our premiums I think they said.
And you know we're looking you know if you go back 10 years or so you're looking at a 5% or so market share.
We do a lot of or work through agents.
Superior commercial units.
Operates directly.
For the insurer and you know what we keep applying ourselves and the rewards keep coming so we're.
We're optimistic about every unit commercial no different than anything else, we feel good about where we are.
In the industry in how we're approaching it and.
You know the success we're having.
And so would you do you think widened a final numbers are tallied up when you compare 2019 versus 28 change that you guys will have gained share in commercial relative to your peer group.
You know MBS does put up through sea area or see if yes area.
Some estimates on that we have to estimate it's very difficult to tell because of the way we don't have a real good definition of those policies.
Commit or consider commercials so.
If we look at it in terms of trends do I think that we gain market share yes.
Would be the bottom line.
I mean do I think there's more room, yes. So okay. That's that's the answer.
Well. Thank you everyone for your answers.
Thanks, Greg.
Thanks, Greg.
Once again as a reminder for analysts and investors who are participating in this call you signaled by pressing star key finally did just one on your telephone keypad to ask a question or if you haven't final question.
So again that is star one.
Go ahead and take that question from Greg Peters of Raymond James. Please go ahead.
Well <unk> I'll take another bite at the Apple or too.
[laughter].
Let me go back to the general insurance business segment.
And.
In the past Al you Ben.
When you when you're doing a yearend call you been.
Generous enough to provide some guidance around where you think are consolidated claims ratio or expense ratio or the composite ratio for general insurance might range for the upcoming year.
And you know from the analyst meeting perspective, we're watching some moving pieces you know one you highlighted the commercial auto and the general liability in the workers comp just wondering if when you went through your budgeting process.
What you might be willing to share with us in terms of an expectation for 2020.
Well you know Craig has gone over that to some degree of maybe call you can't have been Craig you can address that again, because I'm a lot rides on the mix of our business and is continually changing as you can see in the statistical exhibit right.
Oh, you know automobile, which has a different cost structure attached to it you know goes up a comp which has also different cost structure goes down and the combination of those things and then you add to that such a things as our you know financial indemnity business all.
Home warranty business, which tend to have a pretty high expense ratios as that mix changes. It has an impact over the overall expense ratio, but that's as Craig said okay.
Nothing has changed in the.
Our view of what our business can produce a given its current mix and that is the oh the loss ratio range that we show on the bottom of what they just go on page four and the expense ratio range that we see we can't do much better.
And then to speak to those two ratios.
Into in ranges in terms of Rangers.
And I I think you know we've had some difficulties from an underwriting standpoint point in parts of our business, notably the of the automobile business right, but we think over time that fixes itself and we we say we can go even better than 95%.
If only we have a permanent and I think we're headed in that direction a permanent.
Change in direction in terms of of loss reserves will claim reserve developments.
We've always been NIPT all for the several years, we've been Nick by that but we think that.
We are in a strong reserve position then those should start.
Diminish if not evaporates from the consistency of the numbers [noise].
I think thats the best we can give to you.
Or anybody else about where we think the general insurance group can operate given its current mix of business can do to operate had a oh 80 or 80% combined no is never happen can lead to operate at a 90 to 95 plus.
That's ratio, yes, yes, absolutely.
And do you know we've got enough pockets of business that we think we've corrected off line crosses the fixing and you know it takes 18 24 months between the time that you change your Oh youre.
During your pricing and so forth before those results.
Emanate into the earnings prosody create premium pruning process. So I think the combination of all that I'm using a lot of words, but I for one I'm very confident that we can not only operated at 95, but you know start inching.
Down from there, we certainly have a long term record of having done that I think a key point that Greg is is making bryce, suggesting that you know we don't want to solve ourselves from the standpoint of making investments in the future of our business when we do that.
As a price to be paid because.
Any new operation in New adventure, we have in the insurance business right takes some time to jail and initially it creates expenses before it creates earned premiums so I'm throwing all that stuff up India, because they are all part and parcel is.
As to why we've had some difficulty you know reaching that 95, but I I as I say I think we're in good shape to to gradually go somewhat before that below that 95 with card mix of business.
Greg <unk> I would just add that.
If you put two and two together here when we say that.
We want our claim ratio averages to be in the high Sixtys is low seventys and that we're not there and that we're taking considerable action on rate and risk selection and and other steps to address the problematic portions of our portfolio. Obviously, we have.
In fact, all those things to get us to those high Sixtys low seventys. So therefore, our expectation is that we're going to incrementally improve not worsen.
Yeah.
Okay. Thanks, Thanks, Al and Craig. Thank you for that the the answers, but two other questions for you.
And maybe Carl.
He wants to chime in on this one but I'm curious about changes if there's any and your attitudes around the investment portfolio de emphasizing equities more emphasis in equities et cetera, and then I know.
You spoke a little bit about that's Carl around capital, but could you update us sort of where you are.
From a capital adequacy perspective, I know one of the metrics you used to the passes.
You know the reserves to capital a sort of metric.
Give us an update of where are you on that and how you think the company looks going forward.
Sure well first with respect to the equity portfolio, Yeah, we've had.
This increased allocation to equity securities now for the past five or six years I think since year end 2013, when we began to increase the percentage allocated equities.
And that was about the time that CEO yields on our bond portfolio started there they're descent. So I would say the shift was in part.
Uh huh intended to be a yield enhancement to the portfolio overall, such that we would not see is.
Decline there are substantial decline in our net investment income.
So the portfolio, which consists of about 100.
No.
Equity Securities you know well known companies.
With long histories of paying dividends and increasing dividends overtime.
So we feel very good about the portfolio and the market is treated treated us well does this past year in terms of market.
Appreciation.
From a risk perspective, we do perform.
Periodic stress tests to too.
Evaluate what end market correction would do to our shareholders equity account.
And we feel comfortable with the current allocation associate it would not have a material.
A negative effect.
So in terms of capital adequacy.
Yeah, we do.
Follow a number of metrics.
And you're right when the key metrics, particularly for our journal insurance group, whose the reserves to statutory policyholder surplus ratio and and I think because we've stated before.
The target range, we set for ourselves is a 125% to 175%.
Leverage ratio and I will say that as of yearend 20.
Thank team, we are operating at about 100 and.
42%, roughly give or take a little bit.
You know is supportive of a one of my parting comments that we are well capitalized and poised for growth, particularly given the long tail nature of many of our coverages will have an accumulation of reserves overtime, it will need capital to support that growth in the business. So.
We feel very good about a capital levels across the organization you look at our title operation and they've grown capital this year and it's a level that sufficient to make us players in the commercial.
Title space.
I think we've got roughly $570 million of statutory capital in that business.
He also talked about a the semi business and the anticipated return of capital over $150 million this year.
We feel very good about that obviously.
It will require regulatory approval, we've had continued dialogue with the or Caroline Department.
Have presented a dividend plan.
Such that we feel.
Confident that we'll be able to execute on that throughout the course of 2020.
Overall, we feel very good about where we are capital as.
Well what.
Carl just remind me, where what what's the capital position of the run off and life business, yet as a 12 31.
19.
Yeah right now.
Oh for all three of our am I companies total statutory capital is just a hair over $473 million.
And as you may remember.
Greg.
Our feeling is that that business should be.
Probably totally one off by 2020 to 23.
And as Tom indicated earlier.
We think that if we do nothing except run it off that the remnants of of insurance in force that's in place.
Couldn't be reinsured.
I would as a as a result.
Enable us to a deep capitalize a company and take the remainder of the capital and we've said that it is not on thinkable that at the end of the Rainbow.
You know we could be staring at 500 plus million don't lose that company I mean, it is well capitalize and it is it's got a good books of business and on lists all hills should break loose in the real estate business of the housing business.
The loss ratios should continue to be contains there and therefore provide that assurance that.
You know that pot remains at the of the repo.
Can you feel we might do.
Go ahead.
As in the very in a very Julie manner as cost said you know we take it one step at a time based on what's happening to the in force of that business and as you said in the first step we're taking this year with the full approval concurrence of the North Carolina did the park.
And then we know we we see things develop this year and we took the next step so that it's a gradual process over the next.
Three or four years.
As long as we owned the company.
Correct.
And and.
If I'm not Miss well, maybe you can clarify the special dividend that was issued last year.
The funding of that came in part from the excess capital that's sitting in the run off and my business or was the funding of that.
Does that emanates elsewhere.
Yeah, Let me just clarify.
Funding.
For the dividend that was paid in September came from capital resources at the parent holding company level, but it was made in anticipation of receiving a distribution from the M.I. companies and 2020 that was a key consideration.
Thank you for the clarification.
Have a great day for that.
Hey, you too thanks again, Greg.
That concludes today's question answer session. At this time I will turn the conference Dr. management for any additional for closing remarks.
No. We appreciate everyone's participation.
Oh I appreciate in particular your participation Greg for asking some very good questions and keeping us on autos, that's all good and I'm sure that my colleagues here I'm going to be looking forward.
To the next conference call we haven't.
No that the news based on everything we see.
It is going to continue to show.
Hello.
Good old Republic.
Ship.
It will be ceiling majestically going forward.
So with all that we wish you.
Happy day.
This concludes todays call. Thank you for your participation you may now disconnect.
[noise] Oh.