Old Republic’s Q2 Growth Driven by General and Title Insurance

Chicago-based carrier Old Republic International Corp.’s consolidated net operating income per share for this year’s second quarter grew by 8.1 percent compared to the same period of 2002. For the first half of 2003, net operating earnings per share grew by 13.8 percent. Net earnings for the second quarter and first half of 2002 were affected positively by tax recoveries of $10.9 million, or 9 cents per share, stemming from the favorable resolution of tax issues dating back to the Company’s 1987 tax return.

Absent this non-recurring credit for 2002, second quarter and first half 2003 net operating income per share would reflect growth rates of 20.8 percent and 20.5 percent, respectively. Expense recognition of stock options granted in 2003 reduced earnings per share by less than 1 cent per share in this year’s second quarter and first half.
Net income for the second quarter of 2003 totaled $121.5 million, or $1 per share, versus $107.5 million, or 88 cents per share, for the year-ago quarter. Net operating income, which excludes realized investment gains or losses, was $113.2 million, or 93 cents per share, compared to $104.6 million, or 86 cents per share in the same quarter of 2002.

For this year’s first half, net income was $225.9 million, or $1.85 per share, versus $203.0 million, or $1.67 per share, for the first six months of 2002, while net operating income was $222.0 million, or $1.82 per share in 2003, compared to $193.9 million, or $1.60 per share in 2002.

Consolidated operating revenues in this year’s second quarter rose by 22.7 percent to $801.9 million, from $653.5 million in the same quarter of 2002. Net premiums and fees were $717.2 million in the second quarter versus $575.6 million in the year-ago period, an increase of 24.6 percent. Consolidated net investment income was $70.0 million for the second quarter of 2003, 3.4 percent higher when compared to the same period of the preceding year.

For the first half of 2003, consolidated operating revenues were $1.54 billion compared to $1.28 billion for the first six months of 2002. Net premiums and fees for the first six months of 2003 were $1.38 billion compared to $1.12 billion in the same year-ago period. Consolidated net investment income for this year’s first half was $139.4 million, up by 3.4 percent.

While the Company’s invested asset base has continued to grow as a result of stronger operating cash flows, the substantial downtrend in interest rates in the past two years has precluded corresponding growth in investment income.

Old Republic’s General Insurance Group, which underwrites mostly commercial property and liability insurance coverages, generated a 38.2 percent increase over 2002 in pretax operating income for this year’s second quarter to $62.4 million. Net premiums earned in the second quarter of 2003 rose by 18.4 percent to $339.1 million, from $286.3 million a year ago. The composite underwriting ratio for this year’s second quarter dropped to 93.4 percent from 98.7 percent in the same quarter one year ago.

For the first six months of 2003, General Insurance pretax operating
income increased 42.8 percent, totaling $121.8 million compared to $85.3 million for the first six months of 2002. Net premiums earned were $653.0 million versus $555.1 million a year ago, and the composite underwriting ratio was 94.0 percent versus 99.4 percent one year ago.

The improved underwriting performance in both periods of 2003 stemmed largely from a lower claims ratio, though a greater increase in premium revenues than production and operating expenses also led to a decline in the expense ratio.

Topics Profit Loss