Old Republic International Corporation 2026 Q3 Earnings Call

Please go ahead, sir. Okay, Joe.

Thank you, and good afternoon, everyone, and welcome again to Old Republic's third quarter 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 the third quarter of 2025.

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 the third quarter of 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.

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.

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. 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' compensation 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.

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 for a discussion of specialty insurance.

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. So 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 the second quarter.

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, and that compares to 63.5% in the third quarter 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 the third quarter 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 the third quarter of last year. However, there are also some additional items here to note, and that is that there was a $20 million credit loss charge in the quarter that increased the expense ratio by 1.4 percentage points, while a change in mix decreased the expense ratio somewhat in the quarter. If you are comparing to the third quarter of 2025, as a reminder, there was a true-up of ceding commission in that third quarter of 2025 that increased our third quarter 2025 expense ratio by 0.9 percentage points. 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 the third quarter last year.