Executive Summary / Key Takeaways

• Old Republic International (ORI) is a long-standing insurance holding company with a strategic focus on Specialty Insurance and Title Insurance, underpinned by conservative underwriting and reserving practices.
• The Specialty Insurance segment, recently renamed to better reflect its niche strategy, is a key growth engine, driven by rate increases, strong retention, new business, and contributions from new underwriting subsidiaries, consistently delivering profitable combined ratios below 95%.
• The Title Insurance segment is navigating a challenging real estate market but is showing signs of modest revenue growth and improving expense management, supported by strategic technology investments aimed at enhancing efficiency and agent services.
• ORI's robust operating performance, particularly in Specialty Insurance, generates significant capital, enabling substantial returns to shareholders through consistent dividends (84 years uninterrupted, 44 years of increases) and opportunistic share repurchases.
• While exposed to market cycles, reserving uncertainty, and competitive pressures, ORI's long-run management philosophy, diversified portfolio, and ongoing investments in technology and new ventures position it for continued profitable growth and shareholder value creation.

A Foundation Built on Underwriting Discipline and Longevity

Old Republic International Corporation stands as a testament to enduring principles in the insurance industry. With a history stretching back decades, evidenced by an unbroken streak of regular cash dividends since 1942 and 44 consecutive years of increasing that payout, ORI has cultivated a reputation for stability and a long-run management philosophy. Operating primarily through its regulated insurance subsidiaries, the company focuses on two core segments: Specialty Insurance and Title Insurance. This structure, recently refined by renaming the General Insurance segment to Specialty Insurance to better articulate its strategic emphasis on unique niche markets, reflects an evolution rooted in disciplined underwriting and a commitment to balance sheet strength.

ORI's approach is distinct. Rather than chasing market share at the expense of profitability, the company prioritizes achieving favorable underwriting results over cycles. This is supported by a conservative reserving philosophy, which management aims to consistently yield favorable prior year loss reserve development, targeting around 2% on average over time. This deliberate conservatism, while potentially masking underlying trends in shorter periods, is a cornerstone of ORI's strategy to ensure it can meet its long-term obligations to policyholders and beneficiaries.

The company's investment strategy complements its underwriting discipline. Focused on stability of income, capital protection, and liquidity, ORI primarily invests in investment-grade fixed income securities and high-quality, dividend-paying equity securities. This emphasis on value, credit quality, and longer-term holding periods, coupled with matching fixed income maturities to expected liabilities, provides a stable financial foundation, distinct from strategies focused on trading gains or high-risk assets.

In the competitive landscape, ORI operates alongside major players in both P&C (like The Travelers Companies (TRV), Chubb (CB), Progressive (PGR)) and Title (like First American Financial (FAF), Fidelity National Financial (FNF)). While some competitors boast larger scale or faster digital innovation, ORI differentiates itself through its deep expertise in specific niche markets within Specialty Insurance and its strong focus on independent agents within Title Insurance. Its long-standing licenses and distribution networks represent a significant competitive moat, particularly in the highly regulated insurance sectors. However, the company acknowledges vulnerabilities, including the need for continuous technological investment to keep pace with digital leaders and the inherent cyclicality of the Title business tied to the real estate market.

Technology plays a crucial role in ORI's strategy, both in enhancing operational efficiency and maintaining a competitive edge. In the Title segment, recent strategic moves, such as the sale of certain technology platforms (RamQuest and eClosing) and a partnership with Qualia, are aimed at streamlining operations and providing cutting-edge tools for agents. This allows internal teams to refocus on developing crucial technologies like integrating fraud prevention systems and AI, which are considered of utmost importance to strengthen security and enhance operational efficiencies. The stated goal is to ensure internal systems work seamlessly with various closing platforms and to provide agents with innovative solutions to maintain a competitive edge. In the Specialty segment, ORI is also exploring various AI technologies with the stated goal of improving productivity, efficiency, and decision-making. While specific quantifiable benefits or timelines for all these initiatives are not detailed, the strategic intent is clear: leverage technology to improve the value proposition for customers and agents, enhance internal processes, and mitigate risks like fraud, thereby supporting profitability and competitive positioning. These investments are expected to continue across both segments.

Performance Reflecting Strategic Execution and Market Dynamics

Old Republic's recent financial performance underscores the effectiveness of its strategic approach, particularly in its Specialty Insurance segment. For the first quarter of 2025, consolidated net premiums and fees earned saw a robust 12.1% increase, reaching $1,841.0 million, driven by strong contributions from both core segments. Net investment income also grew by 4.0% to $170.7 million, benefiting from higher investment yields despite a lower invested asset base following significant capital returns.

The Specialty Insurance segment, the primary engine of growth and profitability, reported a 13.0% increase in net premiums earned, totaling $1,233.6 million in Q1 2025. This growth stemmed from a combination of premium rate increases on most lines, high renewal retention, new business, and increasing contributions from new underwriting subsidiaries. Management highlighted pronounced growth in commercial auto, property, and general liability. Despite some declines in Canadian coverages and public D&O/transactional risk due to market conditions, the segment achieved a highly profitable combined ratio of 89.8% (down from 90.3% in Q1 2024). This favorable result was supported by a loss ratio of 61.7% (down from 62.7%), which included a higher level of favorable prior year loss reserve development (3.3% vs 2.5%). The expense ratio remained in line with expectations at 28.1%, reflecting investments in new subsidiaries and technology offset by the benefit of scale. Management views these results as a continuation of profitable growth within Specialty Insurance.

In the Title Insurance segment, facing persistent headwinds from higher mortgage interest rates and a tight real estate market, net premiums and fees earned increased by 10.9% to $605.1 million in Q1 2025. This growth was notable given the challenging environment, with agency-produced revenues growing 12.0% and directly produced revenues growing 6.0%. Commercial premiums showed particular strength, increasing 27.0% and representing a larger portion of earned premiums (24% vs 21%). Despite this top-line improvement, the segment's combined ratio remained elevated at 102.1% (down slightly from 102.5%), reflecting the difficult market conditions and seasonal weakness. The loss ratio increased to 2.7% (from 2.2%), primarily due to a lower level of favorable prior year development (0.8% vs 1.2%). However, the expense ratio improved to 99.4% (from 100.3%), demonstrating the impact of expense management and scale. The sale of certain technology platforms also contributed to reduced expenses.

Consolidated operating income (excluding investment gains/losses), which management views as the best measure of core performance, increased by 9.2% to $201.7 million in Q1 2025. This strong operating performance contributed to an improved annualized operating return on equity of 14.4% (up from 11.5% in Q1 2024). Book value per share also saw a healthy increase, rising 7.2% inclusive of dividends declared since year-end 2024, reaching $24.19 at March 31, 2025.

ORI's robust earnings generation has fueled significant capital returns. In Q1 2025, the company returned $93.0 million to shareholders through $68.0 million in regular dividends and $25.0 million in share repurchases. This follows a record amount of capital returned in 2024, including a $2.00 per share special dividend. As of March 31, 2025, approximately $206.0 million remained under the current share repurchase authorization. The company's liquidity position remains strong, with sufficient capacity from subsidiary dividends to cover expected cash outflows.

Outlook and Risks on the Horizon

Management remains optimistic about the company's prospects, particularly in Specialty Insurance. They explicitly expect solid growth and profitability in this segment to continue throughout 2025, driven by the ongoing success of their specialty strategy, operational excellence, and increasing contributions from new underwriting subsidiaries. The strategic expansion into E&S and other niche areas is anticipated to remain a key growth driver.

For the Title Insurance segment, while acknowledging the continued challenges in the real estate market, management expresses cautious optimism for a transition and recovery. They anticipate an improved market environment potentially emerging by summer 2025, which should support further revenue growth and expense ratio improvement. The strategic investments in technology are expected to gradually contribute to the bottom line and enhance the segment's competitive positioning as the market recovers. Management maintains a long-term target for the Title combined ratio between 90.0% and 92.5% over a full market cycle, a level currently elevated due to market conditions.

The Corporate Other segment, which includes the small life and accident business and the parent holding company, is expected to continue producing variable results. Management anticipates a bottom-line loss in this segment throughout the remainder of the year, influenced by the reduced invested asset base following capital returns and variable expenses.

Despite the positive outlook, several risks warrant investor attention. The inherent uncertainty in estimating insurance loss reserves means that ultimate losses could develop significantly differently than currently reserved, potentially impacting future period results. While management's conservative practices have historically led to favorable development, this is not guaranteed. Market and economic conditions, including interest rate fluctuations, inflation, and potential impacts from tariffs, can affect investment valuations, claim severity (e.g., in commercial auto), and demand for insurance products, particularly impacting the cyclical Title business and certain Specialty lines. Competition remains a constant factor, potentially pressuring rates or market share. Furthermore, the reliance on technology, while a strategic focus, introduces risks related to security breaches or system failures. Changes in legal precedents or the application of tort law could also adversely affect loss costs.

Conclusion

Old Republic International presents a compelling investment narrative centered on its disciplined approach to insurance underwriting, strategic evolution into profitable Specialty niches, and commitment to shareholder returns. The company's long history of consistent dividends underscores its financial resilience and management's focus on long-term value creation.

The Specialty Insurance segment is clearly the primary growth engine, demonstrating strong premium expansion and robust profitability, driven by a successful niche strategy and the scaling of new ventures. While the Title Insurance segment faces cyclical headwinds, it is showing signs of stabilization and is strategically positioning itself for a market recovery through focused expense management and technology investments. ORI's conservative reserving practices provide a layer of balance sheet strength, and its strong operating earnings enable consistent and significant capital returns.

While exposed to market volatility and competitive pressures common in the insurance industry, ORI's diversified business mix, disciplined underwriting, and ongoing strategic investments in technology and targeted growth areas provide a solid foundation. For investors seeking a company with a proven track record of profitability, a commitment to returning capital, and a clear strategy for navigating dynamic markets, Old Republic International warrants close consideration.