OLD REPUBLIC INTERNATIONAL CORP (ORI)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 operating EPS was $0.81, above Wall Street consensus of ~$0.74, and GAAP diluted EPS was $0.98; total revenues were $2.114B, also ahead of consensus ~$2.034B. Consolidated combined ratio improved year-over-year to 93.7% and pretax operating income rose to $252.7M . EPS and revenue consensus values are from S&P Global.*
• Specialty Insurance delivered profitable growth: net premiums earned +13% YoY to $1.234B, combined ratio 89.8%, pretax operating income $260.1M; Title Insurance posted 10.9% revenue growth with combined ratio modestly better at 102.1% .
• Favorable prior-year reserve development was 2.6 points (vs 2.3 points last year), with notable strength in workers’ comp, commercial auto, and property; management reduced its estimate for L.A. wildfire losses to “less than $10M” from $10–$15M .
• Capital returns continued but normalized post-special dividend: $93M in Q1 (dividends + buybacks), book value per share rose to $24.19 (+7.2% since year-end inclusive of dividends). Management has just over $200M remaining under the buyback authorization, balancing M&A/new underwriting subsidiaries with shareholder returns .

What Went Well and What Went Wrong

What Went Well

• Specialty Insurance profitable growth: pretax operating income $260.1M and combined ratio 89.8% on 13% net premiums earned growth; strong rate increases in commercial auto and general liability, and E&S direct premiums written +13% . “We continue on our journey of profitable growth within Specialty Insurance” — Craig Smiddy .
• Title Insurance revenue mix improved: premiums/fees +10.9% with commercial premiums up 27% (now ~24% of earned vs 21% last year); investment income up ~7%, combined ratio edged down to 102.1% . “By leveraging Qualia’s expertise… we will equip our… agents with cutting-edge tools” — Carolyn Monroe (Qualia partnership) .
• Loss reserve favorability and investment income: 2.6 points favorable development (vs 2.3 last year) and net investment income +4% on higher bond yields; average reinvestment rate 5.1%, bond book yield 4.6% .

What Went Wrong

• Corporate & Other turned to a pretax operating loss (-$11.8M) on lower invested asset base post capital returns and higher personnel costs (including executive comp tied to performance); management expects corporate bottom-line losses to continue through 2025 .
• Title expense ratio still elevated at 99.4% (though improving), with loss ratio up to 2.7% as favorable prior-year reserve development moderated; management expects gradual improvement as volumes recover and tech savings flow through .
• Macro/tariff headwinds: Canada travel accident and trucking volumes declined; management highlighted potential tariff impacts on auto parts/medical inputs and is monitoring severity/frequency trends closely .

Financial Results

Segment performance

Selected KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We produced $252.7 million of consolidated pretax operating income… combined ratio was 93.7%… Specialty Insurance grew net premiums earned by 13%… pretax operating income $260 million… Title… grew premiums and fees by 11%” — Craig Smiddy .
• “Net operating income of $202 million… operating EPS $0.81… net investment income increased 4%… average reinvestment rate 5.1%; bond portfolio book yield 4.6%” — Frank Sodaro .
• “E&S direct premiums written were up 13%… commercial auto net premiums written grew 9%… rate increases ~11%… reduced estimate for L.A. wildfire losses to less than $10 million” — Craig Smiddy .
• “Commercial premiums increased 27%… 24% of earned… investment income up ~7%… integrating fraud prevention systems and AI technologies is of utmost importance” — Carolyn Monroe .

Q&A Highlights

• Rate vs growth mix: Management sees a mixed rate environment (auto/GL up; public D&O/WC down). New underwriting subsidiaries add “substantial lift” beyond rate/retention, supporting top-line growth .
• Reserving for new lines: Approach mirrors existing businesses; leverage company/industry data. Many new subsidiaries focus on shorter-tail lines (e.g., A&H, property), reducing tail risk .
• Title expense trajectory/tech savings: Expense ratio improvement depends on top-line; tech platform sale expected to deliver ~$4M per quarter savings starting next year; partnership should enhance bottom line through 2025 .
• Macro/tariffs: Canada travel accident and trucking volumes declined; monitoring potential tariff effects on auto parts and medical inputs for WC/auto; vigilant on severity trends .
• Capital returns outlook: After $2.00 special dividend in January, buybacks continue opportunistically; ~$200M authorization remains, balanced against capital for acquisitions/new subsidiaries .
• Corporate expenses: Elevated due to variable executive compensation tied to strong performance and lower invested asset base post capital returns; expect corporate losses to persist in 2025 .

Estimates Context

• ORI beat consensus on both EPS and revenue in Q1 2025. Primary EPS of $0.81 vs consensus ~$0.74; total revenues of $2.114B vs consensus ~$2.034B. Bold beat reflects stronger Specialty margins, favorable reserve development, and higher investment yields . Consensus values from S&P Global.*

Values retrieved from S&P Global.*

Where estimates may adjust:

• Specialty pretax operating income and combined ratio outperformed; sustained rate increases (auto/GL) and reserve favorability could drive upward revisions to 2025 Specialty margin assumptions .
• Title momentum (commercial +27%, mix up to ~24%) may support modest revenue revisions, though elevated expense ratio tempers margin expectations near-term .
• Corporate & Other losses likely to persist in 2025, implying a modest drag on consolidated EPS vs models assuming neutral corporate contribution .

Key Takeaways for Investors

• Strong beat: Operating EPS and revenues exceeded consensus; combined ratio improved YoY with 2.6 points reserve favorability — a positive quality-of-earnings signal . Consensus values from S&P Global.*
• Specialty Insurance execution: 89.8% combined ratio, $260.1M pretax OI, and rate tailwinds (auto/GL) underpin margin durability through 2025; wildfire loss estimate cut < $10M reduces catastrophe uncertainty .
• Title recovery signs: +10.9% revenue, commercial mix rising to ~24%; expense ratio improving but still elevated — watch volumes and tech savings cadence into 2H25/2026 .
• Capital return remains a pillar: Book value/share up to $24.19; ~$200M buyback capacity provides flexibility while funding new subsidiaries/M&A .
• Macrotariff risk monitor: Canada travel accident/trucking softness and potential input cost inflation in WC/auto warrant close tracking of severity; management’s real-time monitoring limits surprise risk .
• Investment yield support: 5.1% reinvestment rate and 4.6% bond book yield sustain NII tailwinds even with a lower asset base post special dividend .
• Near-term trading: Positive skew from estimate beat, Specialty momentum, and lowered wildfire losses; watch for any tariff headlines or title volume datapoints as key sentiment drivers .