Operator: Thank you for joining us and welcome to Old Republic International Third Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the call over to Joe Calabrese with the Financial Relations Board. Please go ahead.
Joe Calabrese: Thank you. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss Q3 2026 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 oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release dated 22 October 2026. Assumptions, uncertainties, and risks exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these assumptions, uncertainties, and risks, please refer to the forward-looking statements discussion in the press release and the company's other recent SEC filings and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings.
Joe Calabrese: We may also include references to net income excluding net investment gains or net operating income, a non-GAAP financial measure, in our remarks or in responses to questions. GAAP reconciliations are included in the press release. 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. Management will make some opening remarks, and then we will open the line for your questions. At this time, I would like to turn the call over to Craig. Please go ahead, sir.
Craig Smiddy: Okay, Joe. Thank you, and good afternoon, everyone, and welcome again to Old Republic's Q3 earnings call. During the quarter, we produced $227 million of consolidated pre-tax operating income, and that compares to $248 million. Our consolidated combined ratio was 96.1%, and that compares to 95.3%. Our annualized operating return on beginning equity continues to stand at 12.1%. That is identical to last quarter. For the first nine months of the year, growth in book value per share, including dividends, stands at 5.7%. We continued to benefit from favorable prior year reserve development, both in specialty insurance and title insurance. We think this continues to reflect our underwriting and reserving discipline. As usual, Frank will provide more detail on reserve development in a few minutes. Specialty insurance net premiums earned were 9.7% higher compared to Q3 2025.
Craig Smiddy: Later in the call, when I discuss specialty, I will provide a little more context around that premium growth for you. Specialty produced $204 million of pre-tax operating income, and that compares to $208 million with a combined ratio of 96.0%, which compares to 94.8%. For specialty, competition remains active across much of the marketplace, although conditions do vary by line of coverage. Legal system abuse continues to put pressure on severity loss trends on our liability lines of coverage. Frankly, those trends are more relevant to us than the competitive environment. In Title, net premiums and fees earned were 7.3% higher compared to Q3 2025, and Title produced $50 million of pre-tax operating income compared to $46 million, with a combined ratio of 96.1% compared to 96.4%.
Craig Smiddy: While Title continued to produce solid results, the recent increase in mortgage interest rates does create some uncertainty regarding transaction volumes as we go forward. We think our Title business has demonstrated over many decades an ability to remain profitable and adapt through a variety of housing and mortgage rate environments. Of course, Carolyn Monroe will provide additional perspective on the market and Title's operating results later in the call. With that, Frank Sodaro, I think I will turn the discussion over to you, and then you can turn it back to me to discuss Specialty, and we will follow that with Carolyn Monroe, who will discuss Title. Frank Sodaro, over to you.
Frank Sodaro: Thank you, Craig Smiddy, and good afternoon, everyone. This morning we reported net operating income of $181 million for the quarter, compared to $197 million last year. On a per-share basis, comparable quarter-over-quarter results were $0.73 compared to $0.78. Starting with investments, net investment income increased 1.5% in the quarter. However, if you exclude a few unique investment charges, net investment income would have increased by about 4%. The increase was due to a larger investment base, partially from the timing of our debt refinancing and, to a lesser extent, higher bond yields. Our average rate on corporate bonds acquired during the quarter was 5.4%, compared to the average yield rolling off of about 4.4%. The total bond portfolio book yield ended the quarter at nearly 4.9%, up about 10 basis points from year-end. Turning now to loss reserves.
Frank Sodaro: Overall, the consolidated combined ratio in the quarter benefited 1.1 points from favorable development, compared to 2.5 points of benefit last year. This was a result of higher favorable development from Title Insurance and a lower level of favorable development from Specialty Insurance. While the level of favorable development from Specialty Insurance was lower than we experienced in recent years, it is within the range of our expectations relative to our long-term target. Digging into specialty coverages, Property continued to have significant favorable development that was higher than prior year. Workers' Comp had a solid level of favorable development, but was significantly lower than what was experienced last year. Commercial Auto had favorable development that was in line with last year, while General Liability and Financial Indemnity had elevated levels of unfavorable development.
Frank Sodaro: We ended the quarter with book value per share of $24.65, which inclusive of regular dividends, represents an increase of 5.7% since year-end. This increase resulted primarily from solid operating earnings and the impact of the bargain purchase gain on the ECM acquisition, and that was partially offset by lower bond valuations related to the current interest rate environment. In the quarter, we paid $76 million in dividends and repurchased $114 million worth of our shares. Since the end of the quarter, we have repurchased another $60 million worth of our shares, and that leaves us with about $460 million remaining in our current repurchase program. I will turn the call back over to Craig Smiddy for a discussion of Specialty Insurance.
Craig Smiddy: Okay, thanks, Frank. Specialty Insurance net premiums written were up 10.5% in the quarter. However, as I indicated earlier, to give you a little more color around that figure includes ECM for the first time and also strong growth in our auto warranty business. If we exclude ECM and we exclude the write-up portion of our auto warranty business, net premiums written were up 4.4% in the quarter. We think that is a growth rate that aligns with where we are at in the P&C underwriting cycle today. We saw strong rate increases on Commercial Auto and General Liability, and I will talk about both of those lines individually in a moment. Our overall retention ratios came in as expected and in line with Q2.
Craig Smiddy: To provide some more color around our auto warranty business, just want to remind everybody that Old Republic participated in this market for many decades through vehicle service contract programs with auto dealers and administrators. Recently, we made a strategic decision to increase our presence in that market by partnering with market-leading administrators with capabilities that align well with Old Republic's capabilities. Frankly, we view this business as an attractive source of growth and diversification because its performance is less driven by the P&C underwriting cycle that we see, and more by the quality of our partnerships with administrators and the quality of their underlying programs. As mentioned in my opening remarks, in the quarter, Specialty pre-tax operating income was $204 million, while the combined ratio was 96%. The loss ratio for the quarter was 64%, which included 0.8 percentage points of favorable prior year loss reserve development.
Craig Smiddy: That compares to 63.5% in Q3 last year when we included 3.4 percentage points of favorable development. The expense ratio for the quarter was 32%, compared with 31.3% in Q3 last year. As you saw in the release, we began to provide an additional combined ratio analysis excluding the impact from the retail write-up portion of our auto warranty business. We did this because we reached an inflection point where the impact on the expense and loss ratios from this portion of our auto warranty business started to become more material due to the significant growth in those programs. With this exclusion, as you can see in that supplemental exhibit, the expense ratio was 29.9 compared to 30.2 in Q3 of last year.
Craig Smiddy: However, there are also some additional items here to note, and that is that there was a $20 million credit charge in the quarter that increased the expense ratio by 1.4 percentage points, while changes in mix decreased the expense ratio somewhat in the quarter. If you are comparing to Q3 of 2025, as a reminder, there was a true-up of ceding commission in that Q3 of 2025 that increased our Q3 2025 expense ratio by 0.9 percentage points. So some moving pieces there. Turning to Commercial Auto, our Commercial Auto net premiums written were up 5.7% in the quarter, while the loss ratio came in at 71%, compared to 68.3 in Q3 last year. Auto liability severity loss trend continues to be impacted by legal system abuse.
Craig Smiddy: As we continue to closely monitor this trend, as we have for many years now, we also continue to maintain our risk selection and pricing discipline when it comes to Commercial Auto. During the quarter, we achieved rate increases for Commercial Auto in the mid-teens, which remain above our view of observed and anticipated loss trends. At the same time, retention ratios remained stable, near 80%. We think these results reflect a market that is rational and generally supportive of our pricing actions. As we continue to benefit from favorable prior year reserve development in Commercial Auto, I will point out that we have had at least 16 consecutive quarters of favorable prior year reserve development Commercial Auto. We think that provides some evidence that our historical underwriting and reserving practices have remained appropriately cautious. In the commercial transportation market, economic factors continue to vary.
Craig Smiddy: Conditions are probably most favorable for large fleet operators while small operators, particularly those operating 1 to 5 units, face greater economic pressures. Because we serve the full spectrum of commercial transportation market, we are able to observe these conditions across a broad range of operators and adjust our pricing and growth strategies accordingly. Now turning to Workers' Comp. Our Workers' Comp net premiums written were up 7% in the quarter, while the loss ratio came in at 62.7%, compared to 63.8 in Q3 last year. In the quarter, we gave up rate in the low single-digit range on Workers' Comp because, as severity trends remained constant, frequency trends continued to decline and wages continued to increase.
Craig Smiddy: Bottom line here is we think our rates remain adequate relative to these loss and exposure trends that we are observing. Moving on, generally speaking, we are very pleased to have successfully closed the ECM transaction this quarter, which, as we noted in the release, was accretive to book value per share and earnings per share. Our newer startup operating companies continue to make good progress. Although these businesses are still relatively small, if you look at it in the context of Old Republic, collectively, they have grown approximately 40% year to date. To us, that is evidence that the investments we have made over the past several years are gaining traction and will continue to contribute more meaningfully as we go forward. Overall, we continue to see a competitive P&C marketplace, and we remain focused on cycle management and risk-adequate pricing that will continue to produce profitable combined ratios.
Craig Smiddy: With that, I will now turn the discussion over to Carolyn Monroe to report on title insurance.
Carolyn Monroe: Thank you, Craig. Title reported premium and fee revenue of $823 million for the quarter, an increase of $7 million compared to the Q3 2025. Interest rates remained elevated throughout the period and moved modestly higher following the Federal Reserve's September rate increase. Despite the higher rate environment, our Title operations delivered solid growth, driven by continued strength in the agency channel, where revenues increased 9% compared to Q3 2025. Revenue from our direct operations was flat compared to the prior year period. Commercial premiums represented 24% of premiums earned during the quarter, compared to 26% in the previous year period. We continue to see a strong pipeline of commercial transactions with a diverse mix across many segments of the commercial real estate market. Agency-generated premiums represented 81% of Title revenues during the quarter, compared to 80% in the Q3 of last year.
Carolyn Monroe: Our loss ratio improved by 60 basis points this quarter compared to last year, driven by higher levels of prior year favorable development, reflecting our consistent and conservative reserving practices. Our expense ratio of 94% was up slightly over the 93.7% we achieved in the Q3 2025. The growth in our agency business increased our agent commissions and contributed an additional 1.7 percentage points to the expense ratio, as agency revenues represented a larger share of our Title revenues. This increase was substantially offset by a 1.4 percentage point improvement from our continued focus on operational efficiency and disciplined expense management, resulting in a quarterly combined ratio of 96.1%. Year to date, our combined ratio has improved to 96.9%, reflecting continued progress toward our long-term objective of achieving a combined ratio below 95%. Investment income increased marginally in the quarter.
Carolyn Monroe: All these items produced pre-tax operating income for the quarter of $50 million, up from $46 million in the Q3 of last year. As we move into the final quarter of 2026, we remain focused on improving operational efficiency and expanding our margins. A key part of that effort is our partnership with Qualia and the continued rollout of our new operating system. Implementation began earlier this year and will continue through the end of next year, strengthening our foundation for long-term success. Thank you, and I will now turn it back to Craig.
Craig Smiddy: All right. Thanks, Carolyn. The fundamentals in specialty insurance remain strong as we navigate a competitive P&C marketplace, and our focus continues to be on cycle management and rate adequacy to achieve combined ratios within our target range. In Title, similar story. Title continues to carefully manage expenses to bring the combined ratio within our target range as we navigate the headwinds of higher mortgage interest rates. With that, we will now be happy to take any questions, and either I will answer your question or I will ask Frank or Carolyn for some help.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We will ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Gregory Peters with Raymond James. Your line is now open. Please go ahead.
Gregory Peters: Good afternoon.
Craig Smiddy: Good afternoon, Greg.
Gregory Peters: I will focus my first question on the specialty insurance segment and the top line. You called out the effect of ECM and also the auto warranty business as it relates to Q3. I am curious what your expectations are for those two components for the next couple of quarters. Are we going to expect a continuing lift to the underlying organic revenue growth of your organization as we go through the next couple quarters, or were those one-time deals?
Craig Smiddy: Thank you for the question, Greg. The short answer is yes, you can expect a continued lift from here on out. The growth within the auto warranty business is going to continue at a robust pace. ECM will continue to contribute to top line and bottom line as we go through the subsequent quarters. You may recall one of the reasons that our acquisition of ECM came to being is they have done a lot to prepare themselves for future growth, and they were somewhat capital constrained. This acquisition provides them with the necessary capital to move forward with their strategic initiatives on several fronts. So we expect some growth, and part of that capital constraint on ECM was their need to have a quota share in place. We no longer have that quota share in place.
Craig Smiddy: That too will add to the net top line and bottom line as well. So we should see, again, good continued growth in both of those areas. With respect to how that changes the top line for specialty and how it influences the loss ratio and expense ratios, we will continue to provide the supplemental information so you can see things with and without.
Gregory Peters: Okay. The other very important area to cover would be the language that you included around the expense ratio in Q3. You call out a bunch of moving parts, so I was just looking for more detail. First of all, the credit loss is kind of a surprise. Curious if there is some underlying issues that you are growing concerned about there. When you talk about the tech spend and all that, just curious how this expense ratio should look over the next several quarters.
Craig Smiddy: Sure. With respect to the credit loss, it was a loss that needed to be recognized under expense under the GAAP accounting rules. These are highly infrequent types of events for us. We, as you know, manage collateral very conservatively. In this case, there was one unique program that had a very poor performance, and as a consequence, was in a collateral deficit position that we have, as of so far, been unable to rectify. So we took the conservative position and put up what we believe to be the ultimate loss for that program, assuming no recoverables beyond the collateral that we have. We do not expect that to have any further developments. We do not see this as a systemic type of situation at all. So that is a little bit about the credit.
Craig Smiddy: With regard to the overall expenses, I will probably begin to focus a little bit more on what our expenses are after we exclude the auto warranty write-up to retail. As I said in my opening comments, it is just hit an inflection point where it is material to the reported expense ratio and having a level set on what things would look like if we were not growing that business, I think is at least how we look at things here. If you look at the expense ratio for the first 9 months without that retail write-up business, you are below a 30 and right at about the 30 for the quarter.
Craig Smiddy: I think if you take away some of those other things, like the credit loss, I think the 9 months year-to-date expense ratios after excluding the auto warranty write-up are more in line with where things hopefully will be as we move forward. I think I have said we are working very hard to try to keep that below a 30, and we will continue to do so.
Gregory Peters: Well, those were my two questions. I will re-queue for follow-up. Thank you.
Craig Smiddy: Thanks, Greg.
Operator: As a reminder, if you would like to ask a question, please press star one to raise your hand, and please pick up your handset when asking a question to allow for optimum sound quality. Your next question is from the line of Paul Newsome with Piper Sandler. Your line is now open. Please go ahead.
Paul Newsome: Good afternoon. Thanks for the call, guys.
Craig Smiddy: Good afternoon, Paul.
Paul Newsome: The ECM and the mortgage businesses, is it fair to assume that those businesses had an improvement or deficit on the combined ratio? Are they having an impact on the bottom line for the combined ratio or is it just a rejiggering of losses and expenses?
Craig Smiddy: The ECM is producing results that are right in line with our target results. You can make the assumption that that will be the case going forward. So far this year, they have produced combined ratios right within that range. We've had limited weather activity. As you know, they are exposed a little bit more to weather than usual within our portfolios. But they've had very good weather results, and as such are having a very good year, and we expect them to continue down that path.
Paul Newsome: I was hoping to ask maybe a bigger picture question where we could kind of step back, Craig, and think about sort of the company within the overall P&C underwriting cycle. We're talking about specialty insurance, obviously not just title. And where you are from a profitability perspective and how you think that profitability will evolve over the next couple of years with the current pricing soft market. Because the combined ratio sort of even if we pull out the call it excess expenses related to the efforts to have a whole bunch of new businesses, which are great for the future. It looks like we're kind of top of the range from a combined ratio perspective. If the goal is to get back to someplace in between the goal, how does that work out from a cycle perspective, you think?
Paul Newsome: Do you think we have to be a little patient, maybe go above the range for a bit before we can get into a normal position? Or do you think there's some other things that could happen along the way given where we are from a big picture perspective? I'd like to not ask about the quarter per se, really the years.
Craig Smiddy: Sure. I appreciate the question, and I understand it. Yeah, I think where we'll end the year, hopefully will be within our range for the year. We've done a very good job looking back over the prior years of producing some very decent combined ratios over the last several years. Our overall philosophy is to, again, be between that 90% and 95%, depending on where we're at in the cycle. Right now, it would appear we're at the top end of that. We're going to work very hard to not exceed the top end as we persevere through a softer market in the next few years. We're currently in the process of planning with each of our operating companies, 21 different operating companies, and putting together plans and making realistic assumptions about rate pressure.
Craig Smiddy: Our view is we would not expect to exceed that range as we move through the next few years of a soft market. That is what we are going to work hard to do. The big variable to all of that is top line. As I mentioned as we try to maintain pricing discipline, top line could suffer. That is really the wild card here is if top line would fall off during the softer years in the cycle, it could push that combined ratio up a bit, driven by the expense ratio. We are keeping an eye on expenses. We are doing everything to maintain a profitable loss ratio. We are sticking with our top-end target that in the softest part of the cycle, we want to be at a 95 or below. That is how we are thinking about it.
Craig Smiddy: As I indicated in my earlier remarks, what we are focused on more than competition and trying to be price competitive is selling our value proposition. That is why we are diversified and decentralized into the specialty niches that are an inch wide, mile deep. We hope that our distribution partners and our customers are viewing us as a value buy as opposed to a price buy. To the extent that we can sell our specialization and the services that come along with that, we think we will come out the other end stronger. At the end of the day, we are going to stay focused on bottom line, and the top line could suffer so far, as I indicated. Even if you look at Commercial Auto, it appears the market is rational.
Craig Smiddy: We are able to get rate increases in the mid-teens on Commercial Auto, rate increases in the mid-teens on General Liability. That is going to be our focus, is rate-adequate pricing. We will see what happens with the top line. So far, we have been able to do okay on the top line, and as I also mentioned, our new startups are starting to produce some meaningful premium that will give us a bit of a tailwind on growth. Right now, those startups are driving up the combined ratio because of the lack of premium relative to their expenses. The more that comes into balance and the premium growth continues to move along in those startup entities, that should help with, again, some tailwind on top line, even if some of our other businesses might have to shrink a little bit. Hopefully that answers your question.
Paul Newsome: Absolutely. Thank you very much.
Craig Smiddy: Thank you, Paul.
Operator: As a reminder, if you would like to ask a question, please press star one to raise your hand. Please pick up your handset when asking a question to allow for optimum sound quality. Your next question is from the line of Gregory Peters with Raymond James. Your line is now open. Please go ahead.
Gregory Peters: Hi. Hey, Craig. Can we go back? If I look at the supplement for the Specialty Insurance segment, and I am focused on the home and auto warranty portion, and you give the net written premium, and I am looking at year-to-date numbers of $545.9 million, which is up materially from the $350 million a year ago. What does this book look like? Is it a $750 million to $800 million book? Is that where we are headed, or is it going even farther than that?
Craig Smiddy: Well, you asked a tough question. Things are progressing very well on the. Let me clarify first that it is driven by auto warranty, even though we do put those two together. But auto warranty on a gross basis is growing significantly, and even on a net basis, you can see the growth you pointed out. We expect that to continue at a very meaningful clip. So looking at it on a net basis, $600 million, $700 million in the next few years is not out of the question, and even higher.
Gregory Peters: So wait, $600, $700 million of annual premium or annual new premium?
Craig Smiddy: Annual premium.
Gregory Peters: Okay. I guess just go to the title business for a second. With rates moving up a little bit, doesn't feel good for the real estate market, and feels like there's pressure on forecasts going forward. I am just curious if you have any differing views on that position and relative to how you see your book of business performing.
Craig Smiddy: I would underscore a point Carolyn Monroe made, and that is that commercial is still coming in very strong, and the pipeline looks robust. Fortunately, we have the commercial tailwinds that are helping to offset some of the residential headwinds. I know I have said many times over the last two or three years that it felt like there was pent-up demand in the residential market, and that if interest rates had a five in front of them instead of a six, that it could be a major turning point for us. Now we are talking about having a seven in front of 30-year mortgage rates instead of sixes. As I pointed out in my comments, as Carolyn Monroe pointed out, it does give us pause about where things might be heading.
Craig Smiddy: But, we do have the commercial that is holding up very well, and we continue to play a very significant role on that business. The only other thing I would point out that I am sure Carolyn Monroe would echo is that what we are seeing right now, we have a footprint in title on agency business that spans the entire country. And we are seeing some very big differences geographically. So, even if you look at our direct, there is certain points in time where direct might be a leading indicator of where residential is going. We would not say that right now. We would not say that it is a good leading indicator because we are seeing too big of a delta between geographies, and we are very limited in our geography on direct.
Craig Smiddy: Residential is driven by our agency, and depending on which marketplace you are talking about, some look pretty decent and others not so much. So, it is a very diverse landscape right now on residential and certainly, the higher 30-year mortgage rates are not helpful. But hopefully, by the time commercial winds down a little bit, we will be hopefully back into the sixes and residential will pick up again. I would point out, too, refi is not a big part of our portfolio. So to the extent that higher interest rates are depressing refis, that is not going to move the needle one way or another for us very much.
Gregory Peters: Thank you for that detail.
Operator: There are no further questions at this time. I will now turn the call back to management for closing remarks.
Craig Smiddy: Well, we very much appreciate all of your attention and participation in today's call, and we are looking forward to our call next quarter where we will be able to report our year-end results. We remain optimistic that given all the things we have discussed today that we will have some good news to report for year-end and final quarter. Thank you very much, and appreciate your involvement again. Thank you.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
