Q2 2024 Old Republic International Corp Earnings Call

Thank you for standing by. At this time, I would like to welcome everyone to today's Old Republic International second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Operator: Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. Excuse me, if you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. Thank you. I would now like to turn the call over to Joe Calabrese with MWW. Joe, please go ahead.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. Thank you.

I would now like to turn the call over to Joe Calabrese with MWW. Joe, please go ahead.

Joe Calabrese: Thank you. Good afternoon, everyone.

Joe Calabrese: And thank you for joining us for the Old Republic Conference Call, second quarter 2024 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at www.oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release and financial supplement dated July 25th, 2024. Risks associated with these statements can be found in the company's latest SEC filing.

Joe Calabrese: Thank you. Good afternoon, everyone, and thank you for joining us for the Old Republic Conference Call.

Speaker Change: Second quarter, 2024 results.

Speaker Change: This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at www.oldrepublic.com.

Speaker Change: Please be advised that this call may involve forward-looking statements as discussed in the press release and financial supplement dated July 25, 2024. Risks associated with these statements can be found in the company's latest SEC filings

Joe Calabrese: 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 you.

Speaker Change: 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.

Speaker Change: At this time, I'd like to turn the call over to Craig Smiddy. Please go ahead, sir.

Craig Richard Smiddy: Okay, Joe. Thank you. Well, good afternoon, everyone.

Speaker Change: Okay, Joe, thank you.

Craig Richard Smiddy: We hope you're enjoying your summers and welcome again to Old Republic's second quarter 2024 earnings call. With me today are Frank Sodaro, our CFO of ORI, and Carolyn Monroe, our President and CEO of Title Insurance. So, during the second quarter, we produced $254 million of consolidated pre-tax operating income, which was up from $227 million in 2023. Our consolidated combined ratio was 93.5, which was little changed from the 92.6 we saw last year.

Craig Richard Smiddy: Well, good afternoon, everyone. We hope you're enjoying your summers and welcome again to Old Republic's second quarter 2024 earnings call.

Speaker Change: With me today are Francis Sodaro, our CFO of ORI, and Carolyn Monroe, our President and CEO of Title Insurance.

Speaker Change: So, during the second quarter, we produced $254 million of consolidated pre-tax operating income. That was up from $227 million in 2023.

Speaker Change: Our consolidated combined ratio was 93.5, which was little changed from the 92.6 we saw last year.

Craig Richard Smiddy: General Insurance's strong underwriting results continued through the first half of 2024, producing $202.5 million of pre-tax operating income in the quarter, an increase of 10%. The general insurance combined ratio was 92.4 in the quarter. In title insurance, they continue to face headwinds from mortgage interest rates in the real estate market, but we were still able to produce $46 million of pre-tax operating income in the quarter, an increase of 32%. The title insurance combined ratio was 95.4 in the quarter.

Speaker Change: General Insurance's strong underwriting results continued through the first half of 2024, producing $202.5 million of pre-tax operating income in the quarter.

Speaker Change: An increase of 10%. The general insurance combined ratio was 92.4 in the quarter.

Speaker Change: In title insurance, they continue to face headwinds from mortgage interest rates in the real estate market.

Speaker Change: But we were still able to produce $46 million of pre-tax operating income in the quarter, an increase of 32%. The title insurance combined ratio was 95.4 in the quarter.

Craig Richard Smiddy: Our conservative underwriting and reserving practices continue to produce favorable prior year loss reserve development in both general insurance and title insurance, though, as expected, not to the same outsized degree that we saw in general insurance the last couple of years. It's worth noting that in 2024, we're on track to produce our 10th consecutive year with favorable loss reserve development. Our balance sheet remains strong while we continue to return capital to shareholders through both dividends and share repurchases.

Speaker Change: Our conservative underwriting and reserving practices continue to produce favorable prior year loss reserve development in both general insurance and title insurance.

Speaker Change: Though, as expected, not to the same outsized degree that we saw in general insurance the last couple of years.

Speaker Change: It's worth noting that in 2024, we're on track to produce our 10th consecutive year with favorable loss reserve development.

Speaker Change: Our balance sheet, it remains strong while we continue to return capital to shareholders through both dividends and share repurchases.

Craig Richard Smiddy: And focused on the long term, we will continue to invest in our new general insurance underwriting subsidiaries, as well as in technology for both general insurance and title insurance. So, with those as my opening remarks, I will now turn the discussion over to Frank. He'll then turn things back to me to cover general insurance, followed by Carolyn, who will discuss title insurance, and then we'll open it up to the usual Q&A. So with that, Frank, I hand it to you.

Speaker Change: And focused on the long term, we will continue to invest in our new general insurance underwriting subsidiaries as well as in technology in both general insurance and title insurance.

Speaker Change: So with those as opening remarks, I will now turn the discussion over to Frank. He'll then turn things back to me to cover general insurance, followed by Carolyn, who will discuss title insurance, and then we'll open it up to the usual Q&A.

Francis Joseph Sodaro: Thank you, Craig. And good afternoon, everyone.

Speaker Change: So, with that, Frank, I hand it to you.

Francis Joseph Sodaro: Thank you Craig and good afternoon everyone. This morning we reported net operating income of $202 million for the second quarter compared to $180 million last year.

Speaker Change: On a per share basis, net operating income was 76 cents in the quarter, up over 20% from last year.

Francis Joseph Sodaro: This morning, we reported net operating income of $202 million for the second quarter, compared to $180 million last year. On a per share basis, net operating income was $0.76 in the quarter, up over 20% from last year. Net investment income increased 20% in the quarter, driven by the impact of higher yields as we continue to turn over the bond portfolio. The average reinvestment rate on corporate bonds was just under 5%, while the comparable book yield on corporate bonds disposed of was 3.6%.

Francis Joseph Sodaro: Net investment income increased 20% in the quarter, driven by the impact of higher yields as we continue to turn over the bond portfolio.

Francis Joseph Sodaro: The average reinvestment rate on corporate bonds was just under 5%, while the comparable book yield on corporate bonds disposed of was 3.6%.

Francis Joseph Sodaro: The total bond portfolio book yield now stands at 4.2% compared to 3.5% at the end of the second quarter last year. Our investment portfolio mix remained largely unchanged from last quarter. The stock portfolio is comprised of blue chip dividend paying companies, and the bond portfolio is comprised of 99% investment grade securities, with an average maturity of 4.3 years. Turning now to loss preservers.

Francis Joseph Sodaro: Total bond portfolio book yield now stands at 4.2% compared to 3.5% at the end of the second quarter last year.

Francis Joseph Sodaro: Our investment portfolio mix remained largely unchanged from last quarter. The stock portfolio is comprised of blue-chip dividend-paying companies, and the bond portfolio is comprised of 99% investment-grade securities.

Francis Joseph Sodaro: with an average maturity of 4.3 years.

Francis Joseph Sodaro: Both general and title insurance groups recognized favorable development in the quarter, leading to a benefit of 2.2 percentage points to the consolidated loss ratio. This is representative of a more normalized level of favorable reserve development when compared to 4.6 points last year. I will now give you some line of business color about the reserve development coming from the General Insurance Group in the corridor. Commercial auto continued to have some favorable development, but at a lower level than last year. Workers' Comp had significant favorable development, but it too was at a lower level than last year. General liability had some unfavorable developments, the majority of which came from accident years prior to 2014.

Francis Joseph Sodaro: Turning now to loss reservers.

Francis Joseph Sodaro: Both general and title insurance groups recognized favorable development in the quarter, leading to a benefit of 2.2 percentage points to the consolidated loss ratio.

Francis Joseph Sodaro: This is representative of a more normalized level of favorable reserve development when compared to 4.6 points last year.

Francis Joseph Sodaro: I will now give you some line of business color about the reserve development coming from the General Insurance Group in the corridor.

Francis Joseph Sodaro: Commercial Auto continued to have some favorable development, but at a lower level than last year.

Francis Joseph Sodaro: Workers comp had significant favorable development, but it too was at a lower level than last year.

Francis Joseph Sodaro: General liability had some unfavorable development, the majority of which came from accident years prior to 2014.

Craig Richard Smiddy: More recent development was spread throughout several of our subsidiaries, with no one entity having a significant amount. Now, as a reminder, with $85 million of earned premium in the quarter, this is a relatively small line for us compared to Commercial Auto and Workers' Comp. We ended the quarter with a book value per share of $23.59, which, inclusive of dividends, equates to an increase of 3.5% since year-end, resulting primarily from our strong operating earnings.

Francis Joseph Sodaro: More recent development was spread throughout several of our subsidiaries with no one entity having a significant amount.

Francis Joseph Sodaro: Now, as a reminder, with $85 million of earned premium in the quarter, this is a relatively small line for us compared to commercial auto and workers' comp.

Francis Joseph Sodaro: We ended the quarter with book value per share of $23.59, which inclusive of dividends equates to an increase of 3.5% since year-end, resulting primarily from our strong operating earnings.

Craig Richard Smiddy: In the quarter, we paid about $70 million in dividends and repurchased $410 million worth of our shares for a total of just under $480 million return to shareholders. Now, since the end of the quarter, we have repurchased another $94 million worth of our shares, leaving us with about $480 million remaining in our current repurchase program. I'll now turn the call back over to Craig for a discussion of general insurance.

Francis Joseph Sodaro: In the quarter we paid about $70 million in dividends and repurchased $410 million worth of our shares for a total of just under $480 million return to shareholders.

Francis Joseph Sodaro: Now, since the end of the quarter, we repurchased another $94 million worth of our shares, leaving us with about $480 million remaining in our current repurchase program.

Francis Joseph Sodaro: I'll now turn the call back over to Craig for a discussion of general insurance.

Craig Richard Smiddy: Okay, thanks for that, Frank. So in general insurance, net written premiums were up 15% in the quarter because of strong renewal retention ratios, rate increases on most lines of coverage, new business growth, and premium production in our new underwriting subsidiaries. It's worth noting that most of our growth in these new underwriting subsidiaries is E&S premium, with the last 12 months of direct written premium in Old Republic Union, which is our non-admitted policy issuing company, running at $553 million. As mentioned in my opening remarks, general insurance pre-tax operating income was $202.5 million, and the combined ratio was $92.4.

Craig Richard Smiddy: Okay, thanks for that, Frank.

Craig Richard Smiddy: So in general insurance, net written premiums were up 15% in the quarter because of

Craig Richard Smiddy: Strong renewal retention ratios, rate increases on most lines of coverage, new business growth, and premium production in our new underwriting subsidiaries.

Speaker Change: It's worth noting that most of our growth in these new underwriting subsidiaries is E&S Premium. With the last 12 months of direct written premium in Old Republic Union, which is our non-admitted policy issuing company,

Speaker Change: running at 553 million dollars.

Speaker Change: As mentioned in my opening remarks, general insurance pre-tax operating income was $202.5 million, and the combined ratio was 92.4. So we're growing at a profitable level.

Craig Richard Smiddy: So we're growing at a profitable level. The loss ratio for the quarter was 64.3, including 2.5 points of favorable reserve development, which compares to 60.9 loss ratio that included six points of favorable reserve development in the same quarter of 2023. The expense ratio was lower at 28.1.

Speaker Change: The loss ratio for the quarter was 64.3, including 2.5 points of favorable reserve development, which compares to 60.9 loss ratio. That included

Speaker Change: Six points of favorable reserve development in the same quarter of 2023.

Speaker Change: The expense ratio was lower at 28.1.

Carolyn Jean Monroe: Now, to provide you with some more color on our two largest lines of coverage. Commercial auto net premiums written grew 14% in the quarter, while the loss ratio came in at 72.3 compared to 67.5 last year due to lower levels of favorable prior year loss development. Rate increases were up approximately 10%, which is commensurate with the loss trends that we're observing. So we're holding steady there. Workers' compensation net premiums written increased by 8% in the quarter, while the loss ratio came in at 50.7, which compares to 37.9 last year, again due to lower levels of favorable prior year loss development.

Speaker Change: Now to provide you with some more color on our two largest lines of coverage.

Speaker Change: Commercial auto net premiums written grew 14% in the quarter, while the loss ratio came in at 72.3 compared to 67.5 last year due to the lower levels of favorable prior year loss development.

Speaker Change: Rate increases were up approximately 10%, which is commensurate with the loss trends that we're observing, so we're holding steady there.

Speaker Change: Workers' compensation net premiums written increased by 8% in the quarter, while the loss ratio came in at

Speaker Change: 50.7, which compares to

Speaker Change: 37.9 last year

Speaker Change: Again, due to lower levels of...

Carolyn Jean Monroe: The loss frequency trend that we're seeing for work comp continues to decline, while the loss severity trend remains relatively stable. So given the higher wage trend within payroll, which is our rating base, the declining loss trend in frequency and the stable loss trend in severity. We think our rate levels remain adequate, even though we gave rate decreases of approximately 7% in the quarter. We expect solid growth and profitability and general insurance to continue in the second half of 2024, reflecting our specialty strategy, our operational excellence initiatives, and our new underwriting subsidiaries that are still in their early stages of scaling up. So with that summary of general insurance, I will now hand it over to Carolyn, so she can report on title insurance.

Speaker Change: favorable prior year loss development.

Speaker Change: The loss frequency trend that we're seeing for work comp continues to decline while the loss severity trend remains relatively stable. So, given the higher wage trend within payroll, which is our rating base,

Speaker Change: The declining loss trend in frequency, the stable loss trend in severity.

Speaker Change: We think our rate levels remain adequate, even though we gave rate decreases of approximately 7%.

Speaker Change: in the quarter.

Speaker Change: We expect solid growth and profitability and general insurance to continue in the second half of 2024.

Speaker Change: reflecting our specialty strategy, our operational excellence initiatives, and our new underwriting subsidiaries that are still in their early stages of scaling up.

Speaker Change: So with that summary for general insurance, I will now hand it over to Carolyn so she can report on title insurance. Carolyn.

Carolyn Jean Monroe: The title group reported premium and fee revenue for the quarter of $663 million. This represents an increase of 2% from the second quarter of 2023. Directly produced premiums and fees represented 24% of revenue versus 23% in the second quarter of last year. These premiums and fees were up 7% from the second quarter of last year, while agency produced premiums were up 1%. Direct open order counts increased by 11% this quarter when compared to the second quarter of 2023. These metrics are also found in our recently enhanced financial supplement. Commercial premiums were 21% of our earned premiums this quarter, consistent with the second quarter of 2023.

Carolyn Jean Monroe: Thank You Craig. The title group reported premium and fee revenue for the quarter of $663 million. This represents an increase of 2% from second quarter of 2023.

Carolyn Jean Monroe: Directly produced premium and fees represented 24% of revenue versus 23% in the second quarter of last year. These premium and fees were up 7% from second quarter of last year, while agency produced premiums were up 1%.

Carolyn Jean Monroe: Direct open order counts increased by 11% this quarter when compared to second quarter of 2023. These metrics are also found in our recently enhanced financial supplement.

Carolyn Jean Monroe: Commercial premiums were 21% of our earned premiums this quarter consistent with the second quarter of 2023.

Carolyn Jean Monroe: Although mortgage rates remain high and the overall real estate market is slow, we're pleased to see revenue growth in the quarter in both the direct and agency channels. We're cautiously optimistic that the market has found some footing, although the timing and the pace of the recovery really remain difficult to forecast. Our pre-tax operating income of $46 million was an increase of 33% over the second quarter of 2023. Our combined ratio of 95.4% compared to 96.9% in the second quarter of last year.

Speaker Change: Although mortgage rates remain high and the overall real estate market is slow, we're pleased to see revenue growth in the quarter in both the direct and agency channels. We're cautiously optimistic that the market has found some footing, although the timing and the pace of the recovery really remain difficult to forecast.

Speaker Change: Our pre-tax operating income of $46 million was an increase of 33% over the second quarter of 2023. Our combined ratio of 95.4% compared to 96.9% in the second quarter of last year.

Carolyn Jean Monroe: Our expense ratio improved to 93.1% from 94.4% in the second quarter of 2023. This was primarily driven by recent expense and efficiency gains, as well as modest growth in our revenue. We continue to emphasize that investing in technology is a critical priority. Our investments include internally developed solutions and the deployment of technology through strategic partnerships and alliances. One such recent partnership allows us to provide our offices and agents with a technology tool and verification service to help mitigate wire fraud and diversion.

Speaker Change: Our expense ratio improved to 93.1% from 94.4% in the second quarter of 2023. This is primarily driven by recent expense and efficiency gains, as well as the modest growth in our revenue.

Speaker Change: We continue to emphasize that investing in technology is a critical priority. Our investments include internally developed solutions and the deployment of technology through strategic partnerships and alliances.

Speaker Change: One such recent partnership allows us to provide our offices and agents a technology tool and verification service to help mitigate wire fraud and diversions.

Carolyn Jean Monroe: Utilizing this strategic alliance, we can quickly respond to the industry-wide, high-cost issue of real estate fraud and security. Housing affordability also remains a significant issue in our industry. A byproduct of this issue has been policymaker challenges to the benefits and cost of title insurance, resulting in unregulated title insurance alternative title waiver programs being brought into play. We continue to work through our industry association on ways to address housing affordability, challenges, and educating policymakers about the benefits of title insurance in protecting homeowners and the biggest financial decisions many of them will ever make.

Speaker Change: Utilizing this strategic alliance we can quickly respond to the industry-wide high-cost issue of real estate fraud and security.

Speaker Change: Housing affordability also remains a significant issue in our industry. A byproduct of this issue has been policymaker challenges to the benefits and cost of title insurance resulting in unregulated title insurance alternative title waiver programs being brought into play.

Speaker Change: We continue to work through our industry association on ways to address housing affordability, challenges, and educating policy makers about the benefits of title insurance in protecting homeowners and the biggest financial decisions many of them will ever make.

Carolyn Jean Monroe: While we are pleased with our second quarter results and activities, we remain mindful that the market is still recovering, and we will remain focused on managing expenses while executing on our strategic plan built around our agents and our people. Thank you, and I'll now turn it back to Craig.

Speaker Change: While we are pleased with our second quarter results and activities, we remain mindful that the market is still recovering and we will remain focused on managing expenses while executing on our strategic plan built around our agents and our people. Thank you and I'll now turn it back to Craig.

Craig Richard Smiddy: Thank you, Carolyn. So, profitable growth continues in general insurance, and we've been able to remain profitable in title insurance. And for the remainder of 2024, we remain optimistic about general insurance, and the same goes for title insurance as we await a transition in the real estate market. So, that concludes our prepared remarks, and we'll now open up the discussion to Q&A, where I'll answer your questions, or I'll ask Frank or Carolyn to help out and respond.

Craig Richard Smiddy: Thank you, Carolyn.

Craig Richard Smiddy: So, profitable growth continues in general insurance, and we've been able to remain profitable in title insurance.

Craig Richard Smiddy: And for the remainder of 2024, we remain optimistic for general insurance and the same goes for title insurance as we await a transition in the real estate market.

Speaker Change: So, that concludes our prepared remarks and we'll now open up the discussion to Q&A where I'll answer your questions or I'll ask Frank or Carolyn to help out and respond.

Operator: Thanks, Craig. And at this time, I would like to remind everyone that in order to ask a question, press star one on your telephone keypad. Once again, star one. And we will pause just a moment to compile the Q&A roster. And it looks like our first question today comes from the line of Greg Peters with Raymond James. Greg, please go ahead.

Speaker Change: Thanks, Craig. And at this time, I would like to remind everyone in order to ask a question, press star one on your telephone keypad. Once again, star one. And we will pause just a moment to compile the Q&A roster.

Speaker Change: And it looks like our first question today comes from the line of Greg Peters with Raymond James. Greg, please go ahead.

Operator: Well, good afternoon, everyone. Hi, Greg.

Unknown Executive: Let's go to the general insurance segment first, and I appreciate the color on the line of business reserve development, Frank. Maybe you could spend a minute and sort of revisit your methodology and approach to loss picks for the most recent accident years. It's come up under intense review for other companies because of concerns about lost cost inflation not being adequately compensated for in the loss picks. And so you've seen some other companies raise their loss picks and some of the longer tail liability lines. So having some perspective on how Old Republic is thinking about that would be helpful.

Speaker Change: Well, good afternoon, everyone. Hi, Greg.

Speaker Change: Let's go to the general insurance segment first.

Speaker Change: And I appreciate the color on the line of business reserve development, Frank.

Unknown Executive: Maybe you could spend a minute and sort of revisit your methodology and approach to loss picks for the most recent accident years.

Speaker Change: It's come up.

Speaker Change: under intense review for other companies because of

Speaker Change: Concerns about lost cost inflation not being adequately compensated for in the loss picks and so you've seen some other companies raise their loss picks and some of the longer tailed liability lines and

Speaker Change: So having some perspective on how Old Republic is thinking about that would be helpful.

Craig Richard Smiddy: Greg, I'll respond initially and then and then hand it to Frank for a little more color. I think, you know, the first thing is that the proof's in the pudding. And as we've talked about in the last several quarters, we've had very large amounts of favorable development in historic years, and we've even hit up against the top end of the range in a favorable way in the more recent years. [inaudible] We feel like we're very good at measuring frequency and severity and very good at selling our value propositions so that we can get the necessary rate changes commensurate with those trends in frequency and And, you know, again, it has proven itself on commercial auto.

Unknown Executive: Greg, I'll respond initially and then hand it to Frank for a little more color. I think, you know, the first thing is the proof's in the pudding, and as we've talked about the last several quarters.

Francis Joseph Sodaro: We've had very large amounts of favorable development in historic years, and we've even

Francis Joseph Sodaro: hit up against the top end of the range in a favorable way on the more recent years.

Francis Joseph Sodaro: um

Francis Joseph Sodaro: We

Francis Joseph Sodaro: We feel like we're...

Francis Joseph Sodaro: Very good at measuring frequency and severity, and very good at selling our value proposition so that we can get the necessary rate changes commensurate with those trends in frequency and severity that we're seeing.

Francis Joseph Sodaro: You know, again, it has proven itself out on commercial auto.

Craig Richard Smiddy: Going five years back, it was a very difficult time for the industry, and a few challenging years for us where there was a considerable spike in severity that was unforeseen. However, over the last... For five years, we've been very diligent, measuring, monitoring frequency and severity, and responding in real time to what we're seeing. So we remain conservative when we set those last picks. We assume that things might not go as planned, and we set them in a conservative fashion.

Francis Joseph Sodaro: Going five years back, it was a very difficult time for the industry and a few challenging years for us where there was a considerable spike in severity that was unforeseen. However, over the last

Francis Joseph Sodaro: For five years, we've been very diligent measuring

Francis Joseph Sodaro: monitoring frequency severity and responding in real time to what we're seeing.

Francis Joseph Sodaro: So we remain conservative when we set those loss picks. We assume that

Craig Richard Smiddy: And then, Frank, maybe you can comment about our hold periods and, you know, how we approach those recent years. We'll be very quick to increase a recent year pick if we see something coming in higher than what we expected. But on the other hand, you know, we're very conservative about reducing those.

Francis Joseph Sodaro: We'll be very quick to increase a recent year.

Francis Joseph Sodaro: Pick if we see something coming in

Francis Joseph Sodaro: higher than what we expected. But on the other hand, you know, we're very conservative about reducing those. If you could comment on those lines, Frank. Sure. Just to give you some color here. Generally speaking, for workers comp, we set a pick and then we hold it for four years plus the current year.

Francis Joseph Sodaro: If you could comment on those lines, Frank. Sure. Just to give you...

Francis Joseph Sodaro: Just to give you some color here, generally speaking, for Workers' Comp, we set a pick, and then we hold it for four years plus the current year. For Commercial Auto, we hold it for three years plus the current year. And for GL, generally speaking, it's four years plus the current year. Now Craig mentioned we were up against the top end of the range at Great West, and we have dipped into some of those hold periods, but that's actually been reduced recently below the original pick, so it's just Great West is the one spot where, as we've talked about in the past, we have the good problem of running up against the top end of the actu

Francis Joseph Sodaro: For commercial auto, we hold three years plus the current year. And for GL, generally speaking, it's four years plus the current year.

Francis Joseph Sodaro: Now, Craig mentioned we were up against the top end of the range at Great West, and we have dipped into some of those hold periods, but that's actually been reduced recently. And outside of Great West, we're back at a point where we're really not lowering our picks in those hold periods.

Francis Joseph Sodaro: below the original pick. So it's just Great West is the one spot where, as we've talked about in the past, we've had the good problem of running up against the top end of the actuarial range.

Craig Richard Smiddy: Okay, thanks for that color. I appreciate that. Craig, in your comments, you also spoke about the new ventures and he talked about how much premium, you know, has been written over the last, I think it was the last 12 months. And I'm looking at your operating statistics, and on slide two of your financial supplement, I'm not quite sure where that is picked up in these numbers, so maybe you can sort of piece it together for us.

Speaker Change: Okay, thanks for that color. I appreciate that.

Craig Richard Smiddy: Craig, in your comments you also spoke about the new ventures and

Speaker Change: He talked about how much premium, you know, has been written over the last, I think it was the last trailing 12 months.

Speaker Change: And I'm looking at your operating statistics and on slide two of your financial supplement, I'm not quite sure where

Speaker Change: that is picked up in these numbers so maybe you can sort of

Craig Richard Smiddy: Sure, I'd be happy to, Craig. So just to reiterate, the number that I gave you for Old Republic Union, our non-admitted insurance policy issuance company, is a number that several lines of business are written on. It's a company that several of our new subsidiaries utilize to write that business. And I gave that number just to give you a little more color about the fact that we are an E&S player and that we're writing a decent amount of E&S business.

Speaker Change: piece it together for us.

Speaker Change: Sure, I'd be happy to, Craig. So, just to reiterate the number that I gave you for Old Republic Union,

Speaker Change: Our non-admitted insurance policy issuance company is a number that several lines of business are written in. It's a company that several of our new subsidiaries utilize to write that business.

Speaker Change: and I gave that number just to give you a little more color about the fact that we are an E&S player and that we're writing a decent amount of E&S business. And where you see that come through on the line of business

Craig Richard Smiddy: And where you see that come through on the line of business page in that financial supplement is property. You can see $165 million, for instance, compared to $124 million last quarter. And you can see where we are at six months and where that compares. General liability, again, that's a line where we're focused on very specialized small account types of general liability, different from the kinds of general liability exposures that perhaps others in the industry write with larger limits and higher hazard levels of exposure.

Speaker Change: page in that financial supplement.

Speaker Change: is property. You can see there, $165 million, for instance, compared to $124 million.

Speaker Change: Last quarter

Speaker Change: And you can see where we're at, six months.

Speaker Change: where that compares general liability. Again, that's a line where we're focused on very specialized small account types of general liability, different from

Speaker Change: The kinds of general liability exposures that perhaps others in the industry write with larger limits and higher hazard levels of exposure and here too you can see the increase

Craig Richard Smiddy: And here, too, you can see the increase from, what, $103 million compared to $67 million in the same quarter last year. So those are the lines that we're primarily writing. Again, we're not focused in our new E&S company subsidiary on PropertyCat, a large limit or umbrella kind of business. It's a small, commercial ENS business. And it's also Inland Marine is the other new underwriting subsidiary that's contributing here, and they're very focused on the bread and butter type of exposure. So hopefully, that gives you a little more color, Craig. It does.

Speaker Change: from, what, $103 million.

Speaker Change: compared to 67 million in the in the same quarter last year. So those are the lines that we're primarily writing. Again, we're not

Speaker Change: focused in our new E&S company subsidiary on PropertyCat. We're not focused on

Speaker Change: Large Limit or Umbrella kind of business. It's small.

Speaker Change: Commercial E&S business.

Speaker Change: and it's also Inland Marine is the other new underwriting subsidiary that's contributing here and they're very focused on the bread-and-butter Inland Marine type of exposures.

Craig Richard Smiddy: It does, thanks. I recognize there are others who are going to ask questions, so I'll just focus on the amount of capital returned. And more importantly, because it's been a phenomenal, phenomenal quarter and year-to-date result with returning capital to shareholders. What, as we think forward, what kind of... Ordinary Capital Returns, Math should we be thinking about, because it seems like, at least recently, it's been elevated.

Speaker Change: So hopefully that gives you a little more color, Craig. It does. Thanks. I recognize there's others who are going to ask questions, so I'll just focus on the amount of capital returned.

Speaker Change: And more importantly, because it's been a phenomenal, a phenomenal quarter and year-to-date result with returning capital to shareholders.

Speaker Change: As we think forward, what kind of ordinary capital return

Speaker Change: What math should we be thinking about because it seems like, at least recently, it's been elevated.

Craig Richard Smiddy: Yeah, well, you know, here too, we have had a very good problem. And that is, even though we've returned significant levels of capital over the last few years, because we're producing so much favorable income, net income to the balance sheet, we really haven't been able to bring the balance sheet down to a more appropriate level. So again, a nice problem to have, but we do.

Speaker Change: Yeah, well, you know, here too, we have had a very good problem. And that is, even though we've returned significant levels of capital over the last few years, because we're producing

Speaker Change: So much favorable.

Speaker Change: Income, net income to the balance sheet. We really haven't been able to bring the balance sheet down to a more appropriate level.

Speaker Change: So, again, a nice problem to have, but we do have a problem.

Craig Richard Smiddy: We see that we have, as a result, carried more capital than we needed to in the last few years, even though we increased the pace. And Frank mentioned in his comments about the remaining capital that's available to return to shareholders through the share repurchase program of about $480 million. We would hope to complete that by the end of the year. But again, with strong earnings this year, we keep replenishing the coffers, if you will, and anticipate that we'll have more capital to return to shareholders as we go forward. So hopefully that helps. Anything that you would add, Frank?

Speaker Change: that we have, as a result, carried more capital than we needed to in the last few recent years, even though we increased the pace.

Speaker Change: And Frank mentioned in his comments about the remaining capital that's available to return to shareholders.

Francis Joseph Sodaro: through the share repurchase program of about $480 million. We would hope to...

Francis Joseph Sodaro: Complete that by the end of the year, but again, with strong earnings this year.

Speaker Change: We keep refilling the coffers, if you will, and anticipate that we'll have more capital to return to shareholders as we go forward.

Speaker Change: So hopefully that helps. Anything that you would add, Frank?

Francis Joseph Sodaro: No, I think that covers it.

Craig Richard Smiddy: Okay, just a minor follow-up on that point. Is the capital from... the sale of the mortgage insurance business, has that been fully accounted for and returned to shareholders, or is there still some remaining on the balance sheet?

Speaker Change: No, I think that covers it. Yep. Okay. Just a minor...

Speaker Change: Follow up on that point, is the capital from.

Speaker Change: The sale of the mortgage insurance business, has that been fully accounted for in return to shareholders, or is there still some remaining on the balance sheet?

Craig Richard Smiddy: You know, I would, Yeah, I would say for the most part that that's been returned. The sale's been closed. We've contemplated that in this buyback program that we put in place. So

Francis Joseph Sodaro: You know, I would

Speaker Change: Yeah, I would say for the most part that's been returned, the sale's been closed. We've contemplated that in this BiPAP program that we put in place.

Craig Richard Smiddy: Fair enough. Thank you for the answers.

Speaker Change: Fair enough. Thank you for the answers.

Operator: All right. Thanks, Craig. And our next question comes from the line of Matt Carletti with JMP Securities. Matt, please go ahead.

Craig Richard Smiddy: All right, thanks, Craig.

Speaker Change: And our next question comes from the line of Matt Carletti with JMP Securities. Matt, please go ahead.

Matthew John Carletti: Thanks. Good afternoon, Matt. I want to go back to the reserve stuff, a couple of questions there, just given what focus it's getting at the industry level. Maybe start with just a numbers question, and that is, are you able to give us the dollar amount of development in those three main areas?

Speaker Change: Thanks. Good afternoon. Hi Matt.

Matthew John Carletti: Hi, I want to go back to the reserve stuff. A couple questions there, just given what focus it's in at the industry level. Maybe start with just a numbers question, and that is, are you able to give us the

Matthew John Carletti: The dollar amount of development in those three main buckets of business for you, commercial auto workers, comp, and GL in the quarter.

Francis Joseph Sodaro: We can, yeah, we could give you those numbers. So I'll just give you dollar amounts. In the quarter, the workers' cap was About $39 million favorable. Commercial auto was a little over $3 million favorable.

Speaker Change: We can, yeah, we could give you those numbers. So I'll just give you dollar amounts in the quarter. Workers cap was...

Speaker Change: About $39 million of favorable. Commercial Auto was a little over $3 million of favorable, and GL was about $9.5 million of unfavorable.

Speaker Change: That's the lion's share of the development we had. The rest of it, there's nothing else there of significance.

Francis Joseph Sodaro: Okay, perfect. And I heard I was caught in your comments, GL.

Speaker Change: Okay, perfect. And I caught in your comments, GL was older years, I think you said 14 and prior, broad strokes, was there a concentration where, I guess workers' comp, commercial auto, very small. Was workers' comp a particular set of years or pretty broad based?

Francis Joseph Sodaro: Well, Workers' Comp was pretty broad based. It's just about every year in the analysis we look at. So it was across all of our subsidiaries and across most of the years that we

Speaker Change: Well, Workers' Comp was pretty broad-based. It's just about every year on the analysis we look at. So it was across all of our subsidiaries and across most of the years that we look at.

Matthew John Carletti: Okay, and then maybe just a higher level question. You know, obviously, we've all listened to, I think, probably the same earnings calls this quarter, and there's really been a point kind of put on particularly more recent acts in the years, but particularly, you know, a couple of your big lines, GL and Commercial Auto, and you guys seem to be performing better than a lot of your peers. And so my question is, you know, why is that?

Speaker Change: Okay, and then maybe just a higher level question. You know, obviously, we've all listened, I think, probably the same earnings calls this quarter, and there's really been a point kind of put on

Speaker Change: particularly more recent acts in the years, but particularly a couple of your big lines, GL and Commercial Auto. And you guys seem to be performing better than a lot of your peers. And so my question is,

Matthew John Carletti: Is it, does it come out of the reserve-keeping process that you guys just started a much more conservative spot and kind of that's what's bleeding it out? Or do you think it's more the underlying business and whether it be how you write the business or what you write within that line of business because they are large catchalls that it's a different subject matter maybe that you're writing versus those peers?

Speaker Change: You know, why is that? Does it come out of the reserving process that you guys...

Speaker Change: just started a much more conservative spot and kind of that's what's bleeding it out? Or do you think it's more kind of the underlying business and whether it be how you write the business or what you write within that line of business because they are large catch-alls?

Speaker Change: that it's a different subject matter, maybe, that you're writing versus those peers.

Craig Richard Smiddy: Yeah, Matt. So I think the answer is probably slightly different depending on the lines of business. But it's really a combination of all of the things that you mentioned. In my response to Greg earlier, I talked about how diligent we are in analyzing frequency and severity trends on a very frequent basis, in real-time, and certainly at least quarterly in adjusting our rates. As necessary, I think we were more quick in responding on commercial auto four or five years ago, and we've been staying on top of it and even ahead of lost cost trends. And that has proven out in our, as I said in my earlier remark to Greg. The proof was in the pudding.

Speaker Change: Yeah, Matt, so I think the answer is probably slightly different depending on the lines of business, but it's really a combination of all of the things that you mentioned. In my response to Greg earlier, I talked about

Speaker Change: How diligent we are in analyzing frequency and severity trends.

Speaker Change: on a very frequent basis, a real-time basis, and certainly at least a quarterly basis in adjusting our rates.

Speaker Change: As necessary, I think we were

Speaker Change: On commercial auto, we were more quick in responding four or five years ago, and we've been staying on top of it and even ahead of lost cost trend.

Speaker Change: And that has proven out in our, as I said in my earlier remarks.

Craig Richard Smiddy: You know, our reserves for commercial auto have been favorable for the last few years, even though the industry has continued to put up unfavorable developments. And in addition to our diligence in how we underwrite the business, price the business, set our initial loss picks, how we set our reserves, our case reserves, are very conservative. We set case reserves to ultimate as soon as possible so that our underwriters and actuaries have as clear a line of sight as possible into what those case reserves are ultimately going to play out.

Speaker Change: To Greg, the proof was in the pudding. You know, our reserves for commercial auto have been favorable for the last few years, even though the industry has continued to put up unfavorable development. And in addition to our...

Speaker Change: diligence in how we underwrite the business, price the business, set our initial loss picks, how we set our reserves, our case reserves.

Speaker Change: is very conservative. We set case reserves to ultimate as soon as possible so that our underwriters and actuaries have as clear line of sight as possible into what those case reserves ultimately are going to play out to be.

Craig Richard Smiddy: And then Frank mentioned Great West, where a large amount of our commercial auto business is coming from. And here, too, it's about the value proposition, the distribution model. We help clients understand when they write their first policy with Great West that they're going to have rate increases every year commensurate with the loss trend, but they're going to receive service, underwriting service, risk control service, that will ultimately bring their losses down, and they buy into that value proposition.

Speaker Change: And then Frank mentioned Great West, where a large amount of our commercial lotto is coming from.

Francis Joseph Sodaro: And here, too, it's about the value proposition.

Speaker Change: the distribution model.

Speaker Change: We, our clients understand when they write their first policy with Great West that they're going to have rate increases every year commensurate with lost trend, but they're going to receive superior claims.

Speaker Change: Service, Underwriting Service, Risk Control Service.

Speaker Change: that will ultimately bring their losses down.

Craig Richard Smiddy: And not only them, but we only deal with a very select set of distribution partners on that business, distribution partners that buy into that value strategy I just outlined, and that bring us clients that also buy into that value strategy. We don't work with brokers that want to spreadsheet us for clients that want to buy the lowest possible price out there in the marketplace; that's not how we sell that business.

Speaker Change: and they buy into that value proposition. And not only they, but we only deal with a very select set of distribution partners.

Speaker Change: on that business, distribution partners.

Speaker Change: that buy-in to that value strategy I just outlined.

Speaker Change: and that bring us clients that also buy into that value strategy.

Speaker Change: We don't work with brokers that want to spreadsheet us for clients that wanna buy the lowest ultimate possible price out there in the marketplace. That's not how we sell that business. www.larryweaver.com

Craig Richard Smiddy: So, that was a mouthful, but as I said, there are really a lot of different variables that I think help us deliver the results that you've seen in the last few years and that you will continue to see.

Speaker Change: So, that was a mouthful, but as I said, it's really a lot of different variables that I think help us deliver the results that you've seen the last few years and that you will continue to see.

Craig Richard Smiddy: That's very helpful. Thank you.

Speaker Change: Okay, that's very helpful. Thank you. And one quick numbers question, if I could squeeze it in and not reserves.

Matthew John Carletti: And one quick numbers question, if I could squeeze it in and not reserve it, fee income this quarter took a nice step up from kind of being $40, $41 million, $42 million for several quarters and stepped up to more like $47 million. Is there anything one-time-ish in there, or is that more of a sustainable number? Maybe just a quick comment on what's going on there?

Speaker Change: You know, fee income this quarter took a nice step up from kind of been $40,000,000,000,000,000,000,000,000 for several quarters.

Speaker Change: and stepped up to more like 47 million. Is there anything one-time-ish in there or is that more of a sustainable number? Maybe just a quick comment on what's going on there.

Craig Richard Smiddy: Sure, Matt. It is not just one time. It is a deliberate, strategic effort to grow our fee business. A good amount of that fee business is coming from our TPA operation within PMA, again where we have had a path of strategic growth expanding into new states, offering our TPA product and services with a unique value proposition around claims management and risk management. And we're starting to see the fruits of that labor and that strategy. So it's not just one time, and we're very focused on growing our fee business going forward. So that is a growth area for us.

Speaker Change: A good amount of that fee business is coming from our TPA operation within PMA, again, where we have had a path of...

Speaker Change: Strategic Growth, Expanding into New States, offering our TPA product and services.

Speaker Change: with a unique value proposition around claims management and risk management.

Speaker Change: and we're starting to see the fruits of that labor and that strategy.

Speaker Change: So, it's not one time, and we're very focused on growing fee business going forward, so that is a growth area for us.

Matthew John Carletti: Wonderful. Thank you for the color. Much appreciated.

Operator: All right, thanks, Matt. And one final reminder, if you would like to ask a question, press one on your telephone keypad. Once again, press one. And our next question comes from the line of Paul Newsome with Piper Sandler Companies. Paul, please go ahead.

Speaker Change: All right, thanks, Matt. And one final reminder, if you would like to ask a question, star one on your telephone keypad. Once again, star one.

Jon Paul Newsome: Afternoon, thanks for the call guys. One more question on reserves because the horse is not dead enough. I wanted to ask about the commercial, a little bit more on the commercial auto business in particular. It looks like your picks relative to peers over time have actually improved a lot, a lot, and a lot more than your peers. Is there something about the book of business that you write, or that some of you are doing from a rate perspective, or fill in the blanks, that would have allowed you to sort of pick your loss ratio, your loss picture, a little bit better than, or a little bit more improved, I should say, than what the industry is overall? Any thoughts you had that could address that would be great.

Speaker Change: And our next question comes from the line of Paul Newsome with Piper Sandler Companies. Paul, please go ahead.

Speaker Change: Afternoon, thanks for the call guys. One more question on reserves because the horse is not dead enough.

Jon Paul Newsome: I wanted to ask about the commercial, a little bit more on the commercial auto business in particular. It looks like Accenture ear picks, relative to peers, over time have actually improved

Speaker Change: A lot, a lot, and a lot more than your peers. Is there something about the book of business that you write, or that some of you are doing from a rate perspective, or, you know, fill in the blanks?

Speaker Change: that would have allowed you to sort of pick actually your loss ratio. Our loss picks are a little bit better than, a little bit more improved, I should say.

Speaker Change: then what the industry is overall. Obviously, the caveat is that there's a lot going on within this segment. But any thoughts you had that could address that would be great.

Craig Richard Smiddy: Sure, sure, Paul, I'd be happy to comment there, and if Frank wants to add anything, he can. You know, we've been, first, very conservative in our lost picking methodology. So, as I think I commented on prior earnings calls, even though all indications from trends, severity, and rate increases might suggest you could lower your loss pick by five points, we would only, for example, lower it by maybe one point. We would never make a move, a big move, from one year to the next. We would want to see those things prove themselves.

Speaker Change: Sure, sure, Paul, I'd be happy to comment there. And if Frank wants to add anything, he can. You know, we've been, first, very conservative in

Francis Joseph Sodaro: are loss-picking methodology. So, as I think I commented on prior...

Francis Joseph Sodaro: Earnings calls, even though all indications from trends, severity, rate increases.

Speaker Change: might suggest you could lower your loss pick by five points.

Speaker Change: We would only, for example, lower it by maybe one point. We would never make a move, a big move, from one year to the next. We would wanna see those things prove out. On auto, we started...

Craig Richard Smiddy: On auto, we started. With a high pick five years ago, it comes back to the point we were talking about earlier. You know, we had those, as the industry did five, six, seven years ago, those surprise severity shocks, and we responded back then by raising our picks to a pretty high level. And we've been very conservative in bringing those down, and we've made no major reduction in our current accident-year loss picks for commercial auto this year relative to last year.

Speaker Change: with a high pick five years ago. It comes back to the point we were talking about earlier. You know, we had those, as the industry did, five, six, seven years ago, those surprise...

Speaker Change: severity shocks, and we responded back then by raising our our picks.

Speaker Change: to a pretty high level. And we've been very conservative in bringing those down. And we've made no major reduction in in our in our current accident year.

Speaker Change: Lost picks for commercial auto this year relative to last year again.

Craig Richard Smiddy: Again, maybe that's just a point. But that's coming off those years, five, six years ago, or it was very high, where we were very conservative and brought those down. And that's our philosophy. That's, that's our thinking. And then I won't repeat it all.

Speaker Change: look maybe a point

Speaker Change: But that's coming off those

Speaker Change: five, six years ago, where it was very high, where we were very conservative in bringing those down. And that's our philosophy, that's our thinking. And then I won't repeat it all, but if you just go back to...

Craig Richard Smiddy: But if you just go back to the earlier question from Matt about, you know, why have we been able to perform so much better than the industry in commercial auto? Again, it's coming from our Great West business, and that conservative pricing approach, that robust pricing approach, monitoring frequency severity, a robust conservative approach to case reserves, to IVNR reserves, the loss pick, it all, and then down to distribution and the insured value proposition buy-in. It all goes to all of that, and that's why we're confident, and that's why we've had the track record we have in commercial auto.

Speaker Change: The earlier question from Matt about, you know, why have we been able to perform so much better than the industry on commercial auto. Again, it's coming from our Great West business.

Speaker Change: and that conservative.

Speaker Change: Pricing approach, that robust pricing approach, monitoring frequency severity.

Speaker Change: A robust, conservative approach to case reserves, to IV&R reserves.

Speaker Change: The Lost Pick, and then down to distribution and insured value proposition buy-in. It all goes to all of that, and that's why we're confident, and that's why we've had the track record we've had in commercial auto.

Jon Paul Newsome: I feel obligated to ask you a question on the title. We've talked for quite some time about emerging technology. Spending, maybe just sort of your updated thoughts as to how that should play out over time. Are we still talking about, have we been talking about something that is essentially ongoing from now until the end of time, or, you know, is there some point where, um..., there's some ability to pull back on that technological spin in the future, assuming that the market doesn't?

Speaker Change: I feel obligated to ask a question on title.

Speaker Change: Spending. Maybe just sort of your updated thoughts as to how that should play out over time.

Speaker Change: Are we still talking about or have we been talking about something that is essentially ongoing from now until the end of time or, you know, is there some point where, you know,

Speaker Change: there's some ability to pull back on that technology spend.

Craig Richard Smiddy: Yeah, I'll be happy to comment, and then Carolyn, you can chip in with your thoughts. Our investments in technology have really been about efficiencies and efficiency gains. And so investments in technology are able to more than offset expenses in other categories. So, from that standpoint, it's a good investment.

Speaker Change: in the future, assuming that the market doesn't change.

Speaker Change: Yeah I'll be happy to comment and then Carolyn you can kick in your thoughts but

Speaker Change: We

Carolyn Jean Monroe: Our investments in technology have really been about efficiencies and efficiency gains. And so investments in technology are able to more than offset expenses in other categories.

Carolyn Jean Monroe: So, from that standpoint, it's a good investment.

Carolyn Jean Monroe: The other thing is, as Carolyn has talked about on several earnings calls, we are trying to make it as streamlined and friendly as possible for our title agents, which we focus 85% of our business on, and we will continue to do that and continue to be the premier provider for independent agents so that we're easy to work with and our technology is cutting-edge. So, I would say we're going to continue to make investments in both of those areas.

Carolyn Jean Monroe: The other thing is, as Carolyn has talked about on several earnings calls, we

Carolyn Jean Monroe: are trying to make it.

Speaker Change: as streamlined and friendly as possible for our title agents that we focus 85% of our business on.

Carolyn Jean Monroe: and we will continue to do that and continue to be the premier provider for independent agents so that we're easy to work with and our technology is cutting edge.

Carolyn Jean Monroe: So I would say we're going to continue to make investments in both of those areas.

Carolyn Jean Monroe: And then just one other area; we are actually, for both general insurance and for title insurance, investing in AI technologies that we think will improve productivity, efficiencies, decision-making in the future, and we're going through a rigorous process to analyze all that's available in those industries, all that might come, and where we should be in making those investments. So, at this point, I would say, because of our modernization efforts within IT, our exploration of AI, our desire to want to be a premier provider for independent agents, and our desire to create as many expense efficiencies as we can in title insurance, especially given some of the focus by regulators and lawmakers on that, we will continue to invest in technology across the board, general insurance, and title insurance as we go forward. So, I would not assume any kind of Carolyn, anything to add? Is this specific to Title IX? No, I think you covered that.

Carolyn Jean Monroe: In title and then I'll just one other area where we are actually for both general insurance

Carolyn Jean Monroe: I think you covered it. A nice recap. Thank you.

Carolyn Jean Monroe: And for title insurance, we are looking at various

Jon Paul Newsome: Thank you, sir. I appreciate the help as always.

Carolyn Jean Monroe: AI technologies that we think will improve productivity.

Carolyn Jean Monroe: efficiencies

Carolyn Jean Monroe: decision making in the future. And we're going through rigorous

Carolyn Jean Monroe: process to

Carolyn Jean Monroe: Analyze all that's available in those industries, all that might come, and where we should be in making those investments.

Carolyn Jean Monroe: So, at this point, I would say, because of our modernization efforts within IT, our exploration of AI, our desire to want to be premier.

Carolyn Jean Monroe: Provider for independent agents.

Carolyn Jean Monroe: and our desire to create as many expense efficiencies as we can in title insurance, especially given some of the focus by regulators and lawmakers on that.

Carolyn Jean Monroe: We will continue to...

Carolyn Jean Monroe: Invest in technology across the board, general insurance and title insurance as we go forward. So I would not assume any kind of reductions.

Speaker Change: Carolyn, anything to add specific to Tyler? No, I think you covered it. Nice recap. Thank you.

Speaker Change: Thanks, everyone. I appreciate the help, as always.

Operator: All right. Thanks, Paul. And it looks like we've got another question from Greg Peters with Raymond James. Greg, please go ahead.

Speaker Change: Thanks, Paul. All right, thanks, Paul.

Speaker Change: And it looks like we've got another question from Greg Peters with Raymond James. Greg, please go ahead.

Unknown Executive: Okay, probably. A relevant follow-up to your comments you were just making, Craig, about expenses.

Unknown Executive: Okay, probably...

Unknown Executive: A relevant follow-up to your comments you were just making, Craig, about expenses.

Craig Richard Smiddy: I think you're coming back, Greg, just because you haven't heard a siren yet and you want to give us more time so you can hear that Chicago Fire Department siren. No, it usually comes...

Speaker Change: I think you're coming back, Greg, just because you haven't heard a siren yet and you want to give us more time so you can hear that Chicago Fire Department siren.

Unknown Executive: No, it usually comes at around 2.20 your time. So I don't know what happened with the fire department. They're not running like clockwork today. Can you spend a minute talking to us about the improvement and let's, I don't want to look at the quarter; let's look at the six-month result and the expense ratio in general insurance. And is there something structural that has happened to lead to that improvement? Should we expect that to continue?

Unknown Executive: No, it usually comes at around 2.20 your time, so I don't know what happened to the fire department, they're not running like clockwork today.

Speaker Change: Can you spend a minute and talk to us about the improvement, and I don't want to look at the quarter, let's look at the six month result and the expense ratio and general insurance.

Speaker Change: And is there something structural that's happened to lead that improvement? Should we expect that to continue?

Craig Richard Smiddy: Sure, Greg, I'd be happy to comment on that. So if we look at the six months in general insurance, 27-9, as opposed to 28-6 last year. Last year, we ended at 28-2, and I know we spoke in several earnings calls about why the trend from about 26 up to 28 was happening. A good portion of that was line of business mixed changes where we might be having to pay higher commissions, but we're writing business at a lower loss ratio. In particular, where we sit today.

Speaker Change: Sure, Greg, I'd be happy to comment on that. So if we look at the six months in general insurance, 27-9.

Speaker Change: as opposed to 28.6 last year. Last year, we ended at 28.2.

Speaker Change: And I know we spoke in several of the earnings calls about why the

Speaker Change: The trend from about 26 up to 28 was happening, a good portion of that because

Speaker Change: of Line of Business Mixed Changes where

Speaker Change: We might be having to pay higher commissions, but we're writing business at a lower loss ratio. In the,

Craig Richard Smiddy: I think that the current Expense ratio is, call it 28, consistent with where we ended last year. Call that 28, is probably a pretty good run rate, as you just heard in the response that I gave to Matt or Paul, I can't recall which. We're continuing to make investments in technology work. And as I said in my opening remarks, we're scaling up these new underwriting subsidiaries. You know, we've had four new underwriting subsidiaries in general insurance that we've added, and those are still expensive, drivers, and three of the four have not yet become profitable.

Speaker Change: Specifically about where we sit today, I think that the current

Speaker Change: Expanse Ratio.

Speaker Change: is a member of the American Association of Deaf and Hard of Hearing people. And I'm going to introduce you to Craig Smiddy. He is a deaf and hard of hearing person and he is a member

Speaker Change: Call it 28, consistent with where we ended last year, call that 28, is probably a pretty good run rate. As you just heard in the response that I gave to

Speaker Change: Matt or Paul, I can't recall which.

Speaker Change: We're continuing to make investments in technology work, and as I said in my opening remarks, we're scaling up these new underwriting subsidiaries.

Speaker Change: You know, we've had four new underwriting subsidiaries in general insurance that we've added, and those are still expense.

Speaker Change: drivers and and three of the four have not yet become profitable. They're carrying a very heavy expense load relative to what they're able to produce in premium. So as they scale up, you know, if we're talking a few years out,

Craig Richard Smiddy: They're carrying a very heavy expense load relative to what they're able to produce in premium. So as they scale up, you know, If we're talking a few years out, uh..., and we don't make further investments in yet additional new underwriting subsidiaries. You know, that could come down. However, we do plan on continuing to add new underwriting subsidiaries and keep it at a similar run rate. But to the extent that scale catches up quicker than expected, that could come down. But I think a good assumption is that we hold around around the 28th. Okay.

Speaker Change: You know, that could that could come down. However, we do plan on continuing to add new underwriting subsidiaries.

Speaker Change: and keep it at a similar run rate. But to the extent that scale catches up quicker than expected, that could come down. But I think a good assumption is that we hold around the 28th.

Unknown Executive: Okay, and pivot to the title business and the expense ratio there because I know there's some moving parts inside that, again, just looking at the six-month result versus last year given what's gone on with title revenues. Carolyn, do you have any expectations the expense ratio could come down? You know, later this year or next year? What's your view there?

Speaker Change: Okay, and pivot to the title business and the expense ratio there because...

Speaker Change: I know there's some moving parts inside that. Again, just looking at the six-month results versus last year, given what's gone on with title revenues. Carolyn, do you have any expectations the expense ratio could come down?

Speaker Change: You know, later this year or next year, what's your view there?

Carolyn Jean Monroe: I would say that our expectations for the full year will be pretty close to, you know, what we saw in 2023 when it, you know, we're, we're really looking at a combined ratio to stay similar to 2023. You know, our expense ratio is always going to be commensurate with the revenue. There's a lot of expenses that get tied to revenue. So I would, I would hope that we would be right around what 2023 was.

Speaker Change: Carolyn?

Carolyn Jean Monroe: I would say that our expectations for the full year will be pretty close to, you know, what we saw in 2023. You know, we're really looking at a combined ratio to stay similar to 2023.

Carolyn Jean Monroe: You know, our expense ratio is always going to be commiserate with the revenue. There's a lot of expenses that get tied to revenue. So I would hope that we would be right around what 2023 was.

Craig Richard Smiddy: And Greg here too, you know, if there's a surprise upside, and there's a rebound in the real estate market sooner rather than later, that scale is really the big driver there in title insurance.

Carolyn Jean Monroe: And Greg here too, you know, if there's...

Unknown Executive: a surprise upside and there's a rebound in the real estate market sooner rather than later, that scale is really the big driver there in title insurance. As you know, those expense ratios came down into the 80s.

Craig Richard Smiddy: As you know, those expense ratios came down into the 80s during the good years, and we feel like we've hit rock bottom. And as I said in my opening comments, we're we await to see what happens. But with respect to the top line, it feels like we've, we're bouncing along the bottom, and ready for a turn. And to the extent that that term A turn comes at a steeper slope or to the extent that it comes earlier, you could see improvement in that expense ratio more rapidly.

Speaker Change: during the good years. And we feel like we're we've hit the bottom. And as I said, in my opening comments, we're we await to see what happens. But with respect to top line, it feels like we've

Speaker Change: We're bouncing along the bottom and and ready for for a turn and to the extent that that term

Speaker Change: a turn comes.

Speaker Change: at a steeper slope.

Speaker Change: or to the extent that it comes earlier.

Speaker Change: You could see improvement in that expense ratio more rapidly.

Craig Richard Smiddy: And going back to what we say, you know, we're targeting. We're not satisfied with 95 combined ratios in title. We want to see, just as we do in general insurance, those combined ratios average between 90 and 92.5 over time. Right now, with the lower level of revenues, it's elevated, but we expect with a reasonable amount of top line coming through title that we would be able to get those combined ratios back down into the 90 through 92 range.

Unknown Executive: Thank you for the follow-up.

Speaker Change: Going back to what we say, you know, we're targeting

Speaker Change: We're not satisfied with 95 combined ratios in title. We want to see, just as we do in general insurance, those combined ratios.

Speaker Change: average between 90 and 92 and a half.

Speaker Change: Over time, right now, with the lower level of revenues, it's elevated.

Speaker Change: But we expect with a reasonable amount of top line coming through title that we would be able to get those combined ratios back down into the 90 through 92 range.

Speaker Change: Thank you for the follow-up.

Operator: Thank you. All right. And that looks like all the questions we have today, so I will now turn the call back over to management for closing remarks. Management, you have the floor.

Speaker Change: Thank you. All right, thanks, Craig.

Speaker Change: And that looks like all the questions we have today. So I will now turn the call back over to management for closing remarks. Management, you have the floor.

Craig Richard Smiddy: Okay, well, I think we've pretty much exhausted the discussion from our standpoint and covered everything that we had hoped to touch on, either in our opening remarks or through the Q&A. And with that, we would just say that we continue to focus on delivering results to shareholders that are superior and, Thank you very much.

Operator: And ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.

Speaker Change: Okay, well, I think we've pretty much drained the discussion from our standpoint and covered everything that we had hoped to touch on, either in our opening remarks or through the Q&A. And with that, we would just say that we thank you.

Speaker Change: continue to focus on delivering results to shareholders that are superior and

Speaker Change: Exceed Expectations, and we wish everyone a good rest of the summer and look forward to seeing you for our third quarter conference call. Thank you very much.

Speaker Change: And ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.

Speaker Change: www.larryweaver.com