Q1 2025 Old Republic International Corp Earnings Call
[inaudible]
Abby: Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time I would like to welcome everyone to the Old Republic International First Quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.
Abby: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time.
Speaker Change: Thank you, and now we now would like to turn the conference over to Joe Calabrese with the Financial Relations Board. You may begin.
Thank you.
Speaker Change: Good afternoon, everyone, and thank you for joining us for the Old Republic Conference call to discuss first quarter 2025 results.
Speaker Change: This morning, you distribute a copy to the press release and post to the separate financial
Speaker Change: So those of the documents are available on Old Republic's website at www.oldrepublic.com
Speaker Change: Please be advised that this call may involve all of these statements as discussed through the press release and financial supplement day-to-day for 24th, 2025. Risk associated with these statements can be found in the company's latest SEC found.
Speaker Change: Presenting on today's conference call will be Craig Smiddy, President and CEO , Frank Sodaro, Chief Financial Officer, and Carolyn Monroe, President and CEO of Old Republic National Title Insurance Group.
Speaker Change: Management will make some opening remarks and then we'll open the line for your question. At this time, I would like to turn the call over to Craig. Please go ahead, sir.
Speaker Change: Well, Old Republic started the new year much like we finished last year with the continuation of an upbeat story of growth and profitability during...
Speaker Change: The first quarter we produced 252.7 million of consolidated pre-tax operating income that's up from 231.5 million in the first quarter of 2024.
Speaker Change: Our Consolidated Combined Ratio was 93.7 and that compares to 94.3 in the first quarter last year.
Speaker Change: especially insurance grew net premiums earned by 13% in the first quarter and produced 260 million of pre-task operating income that's up from 220 million last year.
Speaker Change: In title, despite the continuation of higher mortgage interest rates and a tight real estate market, the title insurance
Speaker Change: Folks, group premiums and fees by 11 percent in the first quarter and produce 4.3 million of pre-tax operating income, which is up 2.3 million from last year.
Speaker Change: The title insurance combined ratio was 102.1 in the quarter compared to 102.5 last year.
Speaker Change: Our conservative reserving practices that we talk about continue to produce favorable prior year-lots reserve development in both specialty insurance and title insurance and Frank will provide a little more detail on that later.
Speaker Change: Our balance sheet remains strong, even as we've returned capital to shareholders through both dividends and share repurchases, and here too, Frank will provide a little more color around that.
in new specialty underwriting subsidiaries, technology, and talent.
Speaker Change: I will now turn the discussion over to Frank for some more color and details around those comments and then Frank will turn things back to me to cover especially insurance and that will be followed by Carolyn Hill Discepts title and then we'll open up for some conversation and Q&A.
Speaker Change: So Frank, with that, I will hand it over to you.
Frank Sodaro: All right. Thank you, Craig. Good afternoon, everyone. This morning we reported net operating income of 202 million for the quarter.
compared to $185 million last year.
Frank Sodaro: First-year basis, comparable year-over-year results were 81 cents compared to 67 cents, a 21% improvement.
Page from Returning Access Capital
Frank Sodaro: Our average reinvestment rate and corporate funds during the quarter was 5.1%.
Frank Sodaro: The total bond portfolio book yield now stands at 4.6%, compared to 4.5% at the end of last year.
Thank you very much. Thank you.
Frank Sodaro: The value of our total investment portfolio increased by nearly 200 million.
Frank Sodaro: Our Equity Portfolio, which is focused on high-quality value stacks and makes up 16% of the total investment portfolio with up nearly 60 million in the quarter.
Turning now to Los Reserves [inaudible]
Frank Sodaro: Both specialty insurance and title insurance recognized favorable development in the quarter, leading to a benefit in the consolidated loss ratio of 2.6 percentage points with no significant unfavorable development to speak of. This compares to 2.3 points of favorable development last year.
I'll now go a little deeper into specialty insurance coverages.
Frank Sodaro: Worker's time. Continue to have strong favorable development. I'll be at less than last year.
Frank Sodaro: Both commercial auto and property experience favorable development that was considerably higher than last year.
Frank Sodaro: In general liability had a very small amount of unfavorable development compared to a more meaningful level of unfavorable development last year.
Frank Sodaro: We ended the quarter with both value per share of $24.19, which inclusive of the regular dividend equated to an increase of just over 7%, and that results with primarily from our strong operating earnings and higher investment valuations.
Frank Sodaro: In the quarter, we paid approximately 500 million for the special dividend declared late last year. In addition, we paid 58 million of regular dividends and repurchased 25 million
Frank Sodaro: We did not purchase additional shares since the end of the quarter, but that leads us with just over 200 million remaining in our current repurchase program.
Craig Smiddy: I'll now turn the call back over to Craig for a discussion of specialty insurance.
Okay. Thanks for that, Frank.
especially assured to that creamy M.
Craig Smiddy: Written, was up 10% in the first quarter and that came from strong renewal retention ratios, rate increases on most of the line of coverage, style of new business writing.
and increasing premium production in our new specialty underwriting subsidiaries.
Craig Smiddy: Our specialty growth continues to expand our E&S presence with seven of our underwriting subsidiaries utilizing over public E&S platforms.
Our E&S direct premiums written, we're up 13% this quarter.
Craig Smiddy: So given these top line and bottom line results we continue on our journey of profitable growth within specialty insurance.
Craig Smiddy: Getting a little more into the details. The loss ratio for the first quarter was 61.7.
Craig Smiddy: including 3.3 percentage points of favorable prior year loss reserve development compared to 62.7 last year that included 2.5 points of favorable development.
Craig Smiddy: The expense ratio was 28.1 in the first quarter compared to 27.6 last year right in line with expectations.
Craig Smiddy: Turned some comments on property catastrophe losses that have impacted the industry as a result of the L.A. wildfires.
Craig Smiddy: During our last quarter's earnings call, you might recall that we indicated we had estimated our ultimate L.A. wildfire losses.
Craig Smiddy: to be between 10 and 15 million, and currently we've reduced that estimate to less than 10 million.
Craig Smiddy: Now if you give you some details on commercial auto and workers compensation are two largest lines of coverage.
Craig Smiddy: Commercial Lotto net premiums written, grew 9% in the first quarter, while the loss ratio came in at 70.3 compared to 71.9 last year.
Craig Smiddy: Raid increases were approximately 11% and consistent with comments we've made in previous quarters that is commensurate with the lost friends that were observing in commercial
Craig Smiddy: Workers' compensation, that premiums, written were 3% higher in the first quarter, while the law free show came in at 58.7 compared to 47 last year.
Craig Smiddy: Lost frequency trend continues to decline while the lost severity trend remains stable.
Craig Smiddy: So, given higher wage trend within payroll, which is of course our rating base,
declining loss frequency trend, stable loss, severity trend.
Craig Smiddy: to mind with decreases that are in the low single digits. We think our rate levels in this line of coverage remain adequate.
Craig Smiddy: We expect solid growth and profitability and specialty insurance to continue throughout 25.
Craig Smiddy: which we think reflects the success of our strategy and our operational excellence initiatives and we also expect to continue to see growing contributions from our newest specialty underwriting subsidiaries.
Speaker Change: So that'll end it for especially insurance for now and I'll hand it over to you, Carolyn, to give us some color and comments on title insurance.
[inaudible]
Thank you, Craig Craig.
Speaker Change: Title Insurance reported premium and fee revenues for the quarter of 605 million. This represents an increase of just under 11% from the first quarter 2024.
Speaker Change: While we are pleased with our performance, conditions in the real estate and mortgage industries continue to be less than favorable in the seasonally weak first quarter.
Speaker Change: Our directly produced premium NCs were up 6% from the first quarter of last year, while agency produced premiums were up 12%
Speaker Change: Commercial premiums increased 27% this quarter compared to first quarter 2024.
Speaker Change: Commercial premiums were 24% of our earned premiums' quarter compared to 21% in the first quarter of last year. Agency premiums made up 78% of our revenue during the quarter up from 77% during first quarter of last year.
Speaker Change: Investment income was also up this quarter around 7% compared to 1st quarter of 2024 reflecting higher investment yields earned.
Our overall loss ratio increased to 2.7% this quarter.
Speaker Change: in the first quarter of 2024. Although prior policy years continued to develop favorably, the amount of favorable development in first quarter 2025 was less than the first quarter of 2024.
Speaker Change: Our pre-checked operating income increased to $4 million this quarter compared to $2 million in the first quarter of last year, and our combined ratio of 102.1% is slightly lower than the first quarter of 2024.
Speaker Change: Our elevated combined ratio continues to reflect market conditions which we are managing through. Our expense ratio improved to 99.4% from 100.3% in the first quarter of 2024, and improvement of nearly 1%.
Speaker Change: Technology continues to be paramount to ensuring smooth and secure real estate transactions. In our previous fourth quarter call, we emphasized the importance of refocusing our technological efforts to streamline business operations.
Speaker Change: In the first quarter, we proudly announced our strategic partnership with Kuala, which saw Kuala acquiring our settlement and production software platforms, Ramquest and E-closing.
Speaker Change: By leveraging quality as expertise in advanced infrastructure, providing a modern digital transaction we will be able to equip our direct offices and title agents with cutting edge tools and solutions.
Speaker Change: This partnership also allows our internal tech teams to reallocate our focus and resources who are developing other crucial technologies that will help us thrive in a competitive market.
Speaker Change: It is necessary for our internal systems such as Remittance, Policy Assurance, CPLs, and
Speaker Change: Additionally, integrating prod prevention systems and AI technologies is of utmost importance to strengthen our security measures and enhance operational efficiencies.
Speaker Change: As we continue to be agency focused, we understand the unique challenges and opportunities that are title agents encounter daily. And we are dedicated to providing them with innovative technological solutions required to maintain a competitive edge. And with that, I'll turn it back to Craig.
Okay, thanks, Carolyn.
Craig Smiddy: So, profitable growth continues in specialty insurance and in title insurance, we remain focused on profitability in a challenging marketplace.
Craig Smiddy: compared to 11.5% in the first quarter last year, which you might have noticed in the supplement. And that's happening as we continue to softly manage capital-returning excess capital to shareholders.
Craig Smiddy: So that'll conclude 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 me out and respond.
. . .
Thank you. Thank you. Thank you.
Speaker Change: and Ladies and Gentlemen, we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.
Craig Smiddy: If you would like to withdraw your question, press star one a second time.
Craig Smiddy: If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Craig Smiddy: Again, it is style one, if you would like to join the queue.
. . .
Thank you. Thank you.
Speaker Change: And your first question comes from the line of Greg Peters with Raymond James. Your line is open.
Thank you. Thank you.
Good afternoon, everyone. Hi, Craig.
Thank you.
Speaker Change: Hello. So, hey, let's go to the specialty insurance business and, you know, as we go through and evaluate your top line performance in the first quarter.
Speaker Change: Can you give us a sense of how much of the top line is a function of rate versus actually new business produced because I imagine it's going to vary by segment.
Speaker Change: Well, that's right, Craig. It does indeed vary by segment as we mentioned. In the release, we're seeing rate decreases.
in the public directors and officers, business.
Speaker Change: Strong Raid Increases still on our commercial auto business and we're also getting strong Raid Increases on our
Speaker Change: General Liability Business as well. So it really is a mixed bag. I would say that our new
Underwriting subsidiaries are providing a pretty substantial
Lift here, beyond just right then.
and Retention and New Business in the Organic.
Speaker Change: segments of our business. So as we indicated last year, we were optimistic that as the new
Speaker Change: Newest Underwriting subsidiaries came online that we were going to continue to see greater and greater contributions throughout.
Growth in Organic Business versus contributions from new underwriting subsidiaries.
Speaker Change: Right, maybe on the new business initiatives, you know, because you don't have a lot of historical data inside the company regarding, you know, claim patterns, etc.
Speaker Change: How do you approach the reserving on these ventures and, you know, how do you approach
Sure, well uh...
Speaker Change: We approach it exactly as we approach all of our other businesses but to your point on
The Longer Tail Lines of Businesses
Speaker Change: We do look at industry data, we look at our own data, and to the extent that those lines of business are the same, we're deriving lost patterns from our existing business.
Speaker Change: Previously were trying to diversify the line of coverage mix and I think we've done a pretty good job of that over the last five years diversifying away from being so concentrated and just workers compensation and
Speaker Change: Auto, Commercial Auto, and through that diversification we've added a considerable amount of short tail lines. So, reserving there is less of an issue. So, for instance, inland marine coverages.
while we have history on in the Marine.
Experience that we could look at.
Speaker Change: It's so short tail, it's a year anyway. So, you know, there's not a lot of tail risk there. And similarly, that would go for our ANH business.
Speaker Change: It's a very short tale, a year to two years and then I'll use another example our new lawyers professional liability business while we've written.
Speaker Change: Professional liability business and even written lawyers professional liability business so we do have a history there and rely on that [inaudible]
Speaker Change: and then all to stop with if you look at our E&S business.
Speaker Change: You know, they're writing general liability, they're writing some auto liability, some property, again the property short tail, and we have the experience. [inaudible]
Speaker Change: that we look to when we're looking at trends on general liability and auto liability. So to sum it up, again, either we have the experience, we might supplement that with some industry experience or it's so, so short tale that
It comes out very, very quickly.
Speaker Change: That's good detail. Thanks. I guess the last question, I'll pivot to Carolyn's business and
Thank you. Thank you.
Speaker Change: I guess ultimately, you know, the expense ratio improved, but still running higher.
Speaker Change: You know, and I don't want to get too hung up on the first quarter, but maybe give us some thoughts about how
Speaker Change: The expense ratio could improve over the course of year relative to the prior year.
and any thoughts you might have on that.
Thank you. Thank you.
Carolyn, I would be happy to kick it off, so...
Speaker Change: We mentioned last quarter and then Carolyn mentioned again in her comments.
Speaker Change: The example where we sold our closing platforms and refocus our technology.
Speaker Change: Development efforts on other tools, and we think we're partnering with a vendor there that's going to provide.
Speaker Change: even better technologies and that alone will help the bottom line as we
Speaker Change: moved throughout this year. It'll gradually help the bottom line and as we move in the next year, we should see.
Speaker Change: Probably about a $4 million per quarter improvement in the bottom line because we were incurring expenses there that were greater than the fees that we were taking in. [inaudible]
Speaker Change: Carolyn, I'll turn it to you. I know there's other things that we're doing as well to manage and then, Greg, I was before I handed it to Carolyn, I would just underscore.
Speaker Change: that I agree with you completely. I wouldn't, if you look at last year where we started at similar position, but we ended up, you know, the year in a better place because of that first quarter being a quarter that is traditionally very. I agree with you.
Low in Transactions. So Carolyn, I've turned it to you.
Carolyn Monroe: Okay, thank you, Craig. Yeah, we, you know, we continue to manage our expenses to the market, but Greg, it's really going to be based on our top line revenue. You know, we've got to see the market turn.
Speaker Change: More for us to really have a large effect on our expense ratio. But it doesn't stop us. I mean we're constantly monitoring what we're doing, what we're spending
Speaker Change: and how we can change that. I do see it improving though throughout the year because we also feel like we're going to see an improved market as we get to this summer.
Speaker Change: So that helped the technology. Yeah, it does. On the technology piece is part of your answer or part of Craig's answer. That was principally in the direct operations, right? That were you you're going to get the savings or was that also agency too?
Thank you. Thank you.
Speaker Change: So, our, this was just, our platforms were totally separate. They actually only served a small piece of our direct operations. They were Ramquistini closing were software platforms that were used out in the market by independent title agents.
Speaker Change: So, but they just rolled up under our whole title operation. They were operated as separate companies that we combined into our financials. So it's not really a function of director agency, they were separate companies.
Got it. Thanks for the answers.
Uh-huh. Thank you, Craig.
Speaker Change: And as a reminder, it is star one if you would like to ask a question and your next question comes from the line of Matt Carletti with citizens. Your line is open.
Okay, thank you. Good afternoon.
Good afternoon, Matt.
Speaker Change: I want to ask you a question on kind of a high level question, but just, you know,
There's been a lot of-
Let me see focus and discussion on uncertainty in the markets.
Speaker Change: Related to the Economy in tariffs and all that sort of thing since call it April 2nd.
Speaker Change: If you've seen anything even anecdotally in your book of business, whether it be on the specialty side, just
Speaker Change: Projects, or clients kind of taking a pause before making decisions or there have been some probably anecdotal articles about the housing market and how people have kind of stopped and
Speaker Change: kind of reassessing maybe a move or buying a house. You know, have you seen any changes in volumes on even on the title slide since then?
. . .
Speaker Change: Right, well, you know, it's hard to really know what we're seeing in the way of top line is a result of tariffs or is it some other economic variable, I would say...
Speaker Change: Probably an area that you could take some credence from is the reduction in our Canadian
on the trucking side is North South.
Speaker Change: type of travel. And we've seen a reduction there. I would think some of that is the care related. And then I feel even more confident saying that
Speaker Change: are active in business up there, the reductions that we're seeing up there are probably some fallout from the tariff discussions because...
Speaker Change: What our tribal action and business does up there. We have the incoming business where you have visitors into Canada.
and students coming into Canada, and then we also have-
Speaker Change: Business, where Canadians are the so-called snowbirds are heading in down into the United States.
Speaker Change: There's been a lot of media coverage where there are not a lot of Canadians or not [inaudible]
Speaker Change: deciding to come here and go somewhere else. So, we've seen a...
Speaker Change: a pretty steep drop-off in our Travel and Accident business. We've seen some drop-offs in the commercial trucking business. So I think that's an area where it's probably this.
Speaker Change: the ensuing behaviors after the tariff. So, and then I would just add, you know, from
Speaker Change: We haven't seen anything from a lot cost standpoint. We're keeping our eyes open on the workers' compensation side of things.
Speaker Change: tariffs down the line could have an impact on pharmaceuticals, could have an impact on medical.
Speaker Change: devices on the commercial auto side of things, tariffs could have an impact on vehicle parts and replacement vehicles. But, you know, we...
Speaker Change: As you know, what we do for a living is monitor in as real time as possible what's going on in severity and frequency trends and to the extent that those tariffs.
Uh...
Tara start to have an impact on severity trend.
Speaker Change: We're going to spot it, and we're going to do what we always do, and react accordingly, just as we have done when there's been inflationary trends in the past. Again, that's for us, that's what we do is...
We are part of our underwriting excellence.
Speaker Change: Proposition is making sure that we have a complete understanding of changes to exposure trend, frequency trend, severity trend.
Speaker Change: and we'll be following it very closely and right now those are the couple of areas in work comp and couple of areas in commercial auto that we know we have to keep an eye on.
Great. Thank you for the color. I appreciate it.
Speaker Change: And your next question comes from the line of Paul Newsome with Piper Sandler. Your line is open.
Thank you.
Paul Newsome: I've got a couple of questions here. First of things start off with a competitive environment question. What are the things that this quarter has been softest as you get into larger markets as opposed to minimum, maybe small? Are you also seeing that anything?
Please.
Speaker Change: You know, Paul, that's a hard one for us to answer most of our business.
is small and mid-commercial business.
Speaker Change: softness and hardness in the small and mid versus the large. On the large, what we do there through our over-public risk management.
Speaker Change: subsidiary, is business whereby the insured are taking the for ponderance of the risk either through large deductible or or captains.
and that this is very sticky for us.
Speaker Change: and our race there are not so much subject to the types of rates you might experience on other kinds of large commercial risk transfer business. This is risk retention business.
Speaker Change: Our book of small commercial, middle market commercial, and large commercial business.
Speaker Change: And now Capitol Margaret's question, a Capitol management question, pardon me.
Speaker Change: So the bi-backs slow or stop at a certain point, curious if there's a reason to that and maybe you could just talk about sort of the outlook.
for Stocks Repurchases Perspective.
Giving a pass.
Sure, so um...
Speaker Change: Yeah, we, uh, I think we discussed that quarter. We made, um,
The decision.
Speaker Change: based upon our analysis of our capital position to evaluate both.
Speaker Change: Special Dividends and Chairy Purchases. And as I think I commented on...
We had a very nice problem of continuing to
Carried too much capital, because as quickly as we could...
Speaker Change: Return Access Capital and reinvested which comes first into our business.
We kept replenishing.
Speaker Change: Issue a special dividend, as Frank commented on, about $500 million through a $2 special dividend because we felt that that's enabled us to
Speaker Change: Retain Access Capital. And as we commented on, we did have some share repurchases.
in the first quarter as well.
Speaker Change: As we go forward, there's a lot of variables at play here, you know, as we entertain new, other new.
especially underwriting subsidiaries as we entertain the possibility of
of Acquisitions, those. [inaudible]
Speaker Change: We require capital, and we still have an outstanding authorization under our existing repurchase, and we'll continue to execute on that as we go forward.
Speaker Change: and we'll see where things are and do what we always do, which is at a point in time where management believes we're continuing.
Speaker Change: or that we have access to capital, we need to return to shareholders, we will take that matter up with our board and decide the best way to return it, whether that's through share repurchases, special dividend or combination of the two.
Speaker Change: And then the one final question. Corporate expense levels look like they jumped a bit in the corner and the commentary and question is just made in here.
Speaker Change: somewhat sustainable, but I know this is actually the way to think about it or it's there.
Speaker Change: another way to figure about how the corporate expenses are going to be. Obviously, like a huge piece of your business, but we told you a little bit my first thing.
Speaker Change: I'm sure I'll comment and then Frank can fill in where he might see appropriate so on corporate expenses.
Speaker Change: You know, this quarter, as we noted in the release, you have...
a lower level.
Speaker Change: of interest income because of the lower invested asset base you've got the
on the expense side of things.
A lot of that is related to executive.
Speaker Change: Compensation Expenses, which were higher, and that's their higher as a result.
Speaker Change: of mostly as a result of performance. A lot of that is variable in nature.
Speaker Change: related to our performance and we have a very strong performance so as a result higher executive compensation levels.
Speaker Change: Nice problem to have because of the very good performance. We have a higher expense there. So on a go forward basis with the reduced level of capital.
Highly variable income and expenses I think you can.
Speaker Change: suggests that the bottom line type of loss within corporate is probably going to continue throughout the remainder of the year.
Thank you for the help. I really appreciate it.
Speaker Change: and that concludes our question and answer session. I will now turn the conference back over to management for closing remarks.
Thank you.
Speaker Change: Okay, well, we have a one-quarter under the belt and it feels pretty good that's far, we're very proud of...
Speaker Change: of the results we've been able to deliver to shareholders and we thank all of our associates and business partners that have helped us achieve that.
Speaker Change: Obviously the economy is a question mark, a lot of volatility, a lot of question marks remain and we'll have to see how the rest of the year goes.
Speaker Change: But so far so good for Old Republic. So thank you very much. We appreciate your time and interest
Speaker Change: And ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.
. .