Good afternoon. My name is Audra and I will be your conference operator today. At this time, I would like to welcome everyone to the Old Republic International Third Quarter 2024 Earnings Conference Call. Today's conference is being recorded. Operator Instructions. At this time, I would like to turn the conference over to Joe Calabrese with FRB. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss third quarter 2024 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both documents are available on Old Republic's website at www.oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release and financial supplement dated October 24, 2024. Risks associated with these statements can be found in the company's latest SEC filings. This afternoon's conference call will be led by Craig Smiddy, President and CEO of Old Republic International Corporation; and several other Senior Executive Members as planned for this meeting. At this time, I'd like to turn the call over to Craig Smiddy. Please go ahead, sir.

All right. Thanks, Joe. Well, good afternoon, everyone, and welcome again to Old Republic's third quarter 2024 earnings call. With me today are Frank Sodaro, CFO of ORI; and Carolyn Monroe, President and CEO of our Title Insurance Group. During the third quarter, we produced $229 million of consolidated pretax operating income, which is down from $251 million in '23. Our consolidated combined ratio was 95% compared to 92% last year. General Insurance had strong underwriting results, which continued through the third quarter, producing $197 million of pretax operating income, down from $216 million last year. The General Insurance combined ratio was at 94% in the quarter, compared to 89% last year. This mostly reflects the anticipated lower level of favorable prior-year loss reserve development when compared to the historically high level we experienced in 2023. High mortgage interest rates and a continuing tight real estate market continue to constrict our Title Insurance business, although we feel like we're at the beginning of a transition in the real estate market, which we'll talk about in a little bit more detail. Despite the headwinds, Title Insurance produced $40 million of pretax operating income in the quarter and almost $90 million so far this year. The Title Insurance combined ratio was 96.7% in the quarter and that's unchanged from the quarter in '23. Our conservative reserving practices continue to produce favorable prior-year loss reserve development in both General Insurance and Title Insurance, though as expected, not to the same historically high level we saw in General Insurance over the last couple of years. In 2024, we remain on track to produce our 10th consecutive year of favorable loss reserve development. Our balance sheet remains strong as we returned capital to shareholders through both dividends and share repurchases during the quarter. We continue to manage for the long run, investing in our new General Insurance specialty underwriting subsidiaries as well as investing in technology in both General Insurance and Title Insurance. So with those opening remarks, I will now turn it over to Frank, and Frank will turn things back to me to cover General Insurance, followed by Carolyn, who will discuss Title Insurance. Then we'll open up to the usual Q&A discussion. So, Frank?

Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $183 million for the third quarter compared to $200 million last year. On a per-share basis, net operating income was relatively flat at $0.71 compared to $0.72 last year. Net investment income increased 17% in the quarter, driven by the impact of higher yields on the bond portfolio. Our average reinvestment rate on corporate bonds was 4.5%, while the comparable book yield on corporate bonds disposed of was 3.1%. The total bond portfolio book yield now stands at 4.3% compared to 3.75% at the end of the third quarter last year and 4% at the end of last year. Our investment portfolio composition and mix remained largely unchanged from last quarter. Turning to loss reserves. Both the General and Title Insurance Groups recognized favorable development in the quarter, leading to a benefit of 1.3 percentage points to the consolidated loss ratio, which is slightly lower than the 2% we strive for. I will now give you some line of business color about the reserve development coming from the General Insurance Group in the quarter. Commercial auto continued to have strong favorable development coming predominantly from our trucking coverages. Workers' compensation also had a high level of favorable development, although significantly lower compared to the same quarter last year. General liability had pluses and minuses across the system and ended with some unfavorable development but at a lower level than last year. Additionally, we recorded unfavorable development of around $25 million within financial indemnity, most of which relates to our transactional risks line of coverage. We saw development across several claims in this coverage, which represents a small portion of the total financial indemnity book. Finally, we had a larger amount of favorable development than usual in our property lines. We ended the quarter with book value per share of $25.71, which inclusive of dividends equates to an increase of 13.7% since year-end, resulting primarily from our strong operating earnings and increased investment valuations. In the quarter, we paid about $67 million in dividends and repurchased $165 million worth of our shares. Since the end of the quarter, we've repurchased another $23 million worth of our shares, leaving us with about $385 million remaining in our current repurchase program. I'll now turn the call back over to Craig for a discussion of General Insurance.

All right, Frank. Thanks. General Insurance net written premiums were up 16% in the quarter with strong renewal retentions, rate increases on most lines of coverage, new business growth, and increasing premium production in our new specialty underwriting subsidiaries, where most of that business is written on E&S paper. Our E&S premiums were up 21% in the quarter and are running at $585 million on a trailing 12-month basis. As I mentioned in my opening remarks, in the third quarter, General Insurance pretax operating income was $197 million and the combined ratio was 94%. On a year-to-date basis, pretax operating income is at $620 million and the combined ratio is at 92.3%, which is exactly in the middle of the target range we give of between 90% and 95%. This demonstrates that we continue to grow at a strong clip at a very profitable level. The loss ratio for the quarter was 65.2%, which includes 1.7 points of favorable prior-year loss reserve development. That compares to 60.4% for last year, which included 6.1 points of favorable development. Absent the impact of favorable reserve development, the accident year loss ratio was relatively stable as compared to last year on both a quarterly and year-to-date basis. The expense ratio held relatively steady at 28.8% compared to 28.6% last year and is running at 28.2% for the year, again right in line with our expectations. Now turning to property catastrophic losses that impacted the industry in the third and fourth quarters. First, let me express that our thoughts remain with those recovering in the disaster areas, which includes about 1,000 of our associates. As most of you on the call know, we write less catastrophe-exposed business than most of our peers. With that said, we expect ultimate losses for Helene to be between $8 million and $10 million, and ultimate losses for Milton to be between $18 million and $23 million. As Frank mentioned, we experienced unfavorable prior-year loss reserve development in the financial indemnity line of coverage, stemming primarily from transactional risks written in our professional liability unit, which predominantly writes D&O and E&O and other management liability covers. The unfavorable development drove the high 83% loss ratio that you can all see in the financial supplement for the financial indemnity line of coverage. Now providing you more details on commercial auto and workers' compensation, two of our largest lines. Commercial auto net premiums written grew 14% in the quarter, while the loss ratio came in at 67.1% compared to 66.3% last year due to slightly lower levels of favorable prior-year loss reserve development, though still strong. Rate increases were approximately 10% and that remains commensurate with the loss trends we observe in that line. Workers' compensation net premiums written held relatively steady quarter-to-quarter, while the loss ratio came in at 58.8% compared to 33.2% last year due to much lower levels of favorable prior-year loss reserve development this year compared to the historically high levels we experienced in 2023. So, given the higher wage trends within the payroll, which is our rating base, the declining loss frequency trend, the stable severity trend, and our rate decreases of approximately 4% on this line, we continue to believe our rate levels remain adequate for workers' compensation. We expect solid growth and profitability in General Insurance to continue for the remainder of '24, reflecting the success of our specialty strategy, our operational excellence initiatives, and our new specialty underwriting subsidiaries. So with that said for General Insurance, I will now turn the discussion over to Carolyn to report on Title Insurance. Carolyn?

It does look like Carolyn has disconnected. If we could just wait one moment while we reconnect.

Okay. I know Carolyn is in one of those areas impacted by the recent catastrophes. So hopefully, we'll get her back on. So that we don't have downtime for all those listening in. Perhaps I can kind of wrap.

Craig, I got reconnected. I'm sorry.

No problem. I was ready to pivot and call an audible here, but we'll hand it to you.

All right. Thank you. Sorry about that. The Title Group reported premium and fee revenue for the quarter of $709 million. This represents an increase of nearly 4% from the third quarter last year. Our directly produced premiums and fees represented 22% of revenue versus 21% in the third quarter of 2023, and our fees were up 9% from the prior year; while agency-produced premiums were up 2%. Our commercial premiums decreased 6% and represent approximately 20% of our net premiums for the quarter. While commercial premiums decreased slightly, we are seeing some positive signs in our direct operations. Commercial direct new title orders were up 11% compared to the third quarter of 2023. Our pretax operating income of $40 million was an increase of 7% over the prior year third quarter. Our expense ratio of 94% and our combined ratio of 96.7% are consistent with the third quarter of 2023. Since the end of 2022, interest rates have been the headline story in our market. While many homeowners have already secured low interest rates, homebuyers that purchased during last year's rate increases are now seeing an opportunity to lower their rates. We are also seeing homeowners taking advantage of the equity in their homes to remodel or for other cash needs. These two activities are driving up refinance activity. The recent Fed rate increase is significant because it signals a long-awaited shift in monetary policy to spur economic growth. While housing affordability and lack of residential housing inventory still represent headwinds for our industry, the shift in Fed policy is a very positive sign for our industry. In our direct operations, we have seen an increase in our open orders each quarter this year. Overall, our third quarter new open residential title orders in our direct locations were up 26% compared to the third quarter of 2023. As we start the final quarter of this year, we continue to focus on modernization efforts in our direct operations and bringing value and servicing our agents as they prepare for an increase in business as the markets recover. We'll continue to emphasize that investing in technology is a critical priority. While we are pleased with our third-quarter results and activities, we remain mindful that the market is still recovering from the downturn and we will remain focused on managing for the long run. Thank you, Craig.

It feels like we're at the beginning of a transition in the real estate market. Overall, our year-to-date results are driving positive performance in our earnings per share growth, our operating return on equity, and our book value growth. These results have enabled us to return a record amount of capital to shareholders this year. That concludes our prepared remarks, and we'll now open up the discussion to Q&A, where either I'll answer your question or I'll ask Frank or Carolyn to help respond. So we'll open it up to Q&A.

Operator Instructions. We'll take our first question from Gregory Peters at Raymond James.

Well, good afternoon, everyone. So the last couple of comments I missed, I must have also had a poor connection here. I got back in when you were talking about share repurchase activity. So can we go back to the capital management initiatives, what the expectations are for share repurchase for the balance of the year, and how you think about it for '25?

Sure. Greg, since I'm not sure what you might have missed, and knowing you're in the same area as Carolyn, perhaps Frank could recap where we were during the quarter and since then regarding our share repurchases.

Yes. Share repurchases in the quarter were about $165 million. Since the end of the quarter, we did another $23 million. That takes the full year up to $768 million of repurchases, putting us right at about $1 billion return when you include dividends. The other thing I'd add is we have about $385 million remaining on our current authorization.

Yes. And Greg, I would just speak to that and say that we have always been mindful of valuation when we're repurchasing and our pace of repurchases does depend somewhat on that. It looks like we could continue to repurchase through the end of the year, and that could possibly exhaust the remaining amount of $385 million that Frank spoke to, or that might go into the first quarter of next year as we continue down the repurchase path.

Thank you for clarifying that. The second question, in your comments, Craig, you spoke about, I think you said E&S was up 21%. Is that for the four businesses, the new ventures you've been discussing where the premium is up, and I think you said the run rate is around $588 million? Can you just give us an update on how you're looking at those businesses, because I think that's a growth engine as we think out over a multi-year period?

Sure. Yes, I'd be happy to. Just to level set, again, Old Republic Union is our non-admitted surplus line company, and all of our 17 subsidiaries within the General Insurance Group have access to that paper. Several of our subsidiary companies do use that paper on some of their business. However, a good amount of the growth we're seeing is coming from a couple of our newer subsidiaries, primarily our Old Republic E&S operation. We expected that to grow, and it's growing in line with our expectations, continuing at a steady clip for the next couple of years at least. Old Republic Inland Marine, which we set up just prior to that, is also helping to produce premium. To a lesser extent, we have Old Republic Lawyers Professional and our new Old Republic A&H, but again, those are to a lesser extent. Primarily, it's our Old Republic E&S operation that's driving a lot of that growth within the E&S space.

Fair enough. I guess the final question just on the reserve development. I don't recall, Frank, ever hearing about a 2% favorable reserve development target for the company. So that was a new piece of information. The other thing is, I think you mentioned it twice in the call, which is this charge of $25 million in financial lines. Is this a one-time situation or is there potential erosion of this as we look into the quarters ahead?

Yes. So Greg, let me first talk about that 2%. I know in the past I've expressed hope to produce favorable development as opposed to going between favorable and unfavorable development, and as such, we hope for about 2 points of favorable development on average over time. That remains our target. It might be too strong of a word, but we believe our conservative reserving practices will result in favorable development of about that 2% level on average over time. Regarding the transactional risk business, as Frank said, it's a small part of our professional business, and it is currently running. To give you some relativity, we've been reducing our writings in that area this year. So year-to-date, we're at about $14 million in premiums in that area. It's primarily within our professional liability unit, which predominantly writes D&O and E&O management liability coverage. It's a very small piece of our overall financial indemnity line. As mentioned earlier, we've seen a small number of claims, but they had some severity. Whenever we see something like that, we take a conservative view and set reserves. That's what we did this quarter, and we'll have to see where things go. But that's our best view of the situation right now on that business, and again, we've taken a conservative approach as we always do when we see something unfavorable.

Thank you very much for the answers.

Thanks, Greg.

Operator Instructions. We'll move next to Karol Chmiel at Citizens JMP.

Yes, hi. Thanks.

Hi, Karol.

Hi, I'm calling in for Matt. He's unavailable right now. But my main question is regarding commercial auto. Craig, you had mentioned earlier that commercial auto you're going to get the 10% rate, which is in line with the loss cost trend. But my question is really, are you seeing any of the frequency and severity that is being seen in the industry? If not, is your book any different from your peers?

Sure. We believe our book differs from our peers in how we approach the business. I've spoken previously about how our reserving practices are different, our claims practices are specialized, and our distribution model is distinct. However, with frequency and severity, it's very hard to isolate yourself from what the industry is confronting, whether that be workers' compensation or auto. Our executives had a meeting just yesterday with the folks from NCCI for instance on worker's compensation, and their observations regarding frequency and severity are very much aligned with what we're seeing. The same goes for auto. It is challenging to immunize oneself from frequency and severity factors driven by how many miles are being driven and traffic congestion on the roads. Similarly, social inflation, jury verdicts, and the like will drive severity. Therefore, what we’re seeing regarding frequency and severity in auto seems consistent with the industry at large. The difference for us, as evident in our favorable loss reserve development on commercial auto, stems from our notably more conservative reserving practices. We swiftly reacted to changes in severity starting back in 2019, and we improved our pricing analytics, refined our rate filings, and initiated rate increases to align us back to where we needed to be. Over the last five years, we've achieved an average of a 10% rate increase, reflecting our proactive strategies that have contributed to our reputable results.

Great, thank you. That's very helpful. And just a short follow-up regarding the buybacks and the overall capital management. You guys said earlier that you're open to maybe using all your buyback for this year or maybe into next year. Is there something that you're looking at? I mean, are you looking to use the capital more for premium growth?

Well, let me just step back and give you perhaps a broader response. And that is, as I've indicated in several quarters when the issue of capital management comes up, I remind everyone that we review our capital management position with our Board every quarter and make a recommendation on ways to return excess capital if we deem there to be excess capital. The first preference for capital is to grow the business. However, we have been fortunate to produce such results that our retained earnings have replenished our returns over the last several years. As we enter next year, I suspect we will again find ourselves in a position where retained earnings will continue to fill our capital bucket. Unless an opportunity arises for an M&A transaction or we uncover possibilities for stronger investments in new businesses, we may deem that capital to be in excess. At that point, we'll subsequently engage in discussions with our Board about the best ways to return that capital, whether it be through a share repurchase or through a special dividend.

Great. Understood. Thank you very much.

Thank you.

In your press release, you called out a warranty, home warranty as being where pricing's being competitive and pulling back. Yet if I look at the segment's results, our net written premium was up substantially in the quarter and up for the year. So maybe you can help walk us through the moving pieces inside that segment.

Yes. So I'll discuss it a little, Greg. In our Home and Auto Warranty segment, we wrote a new program focused on auto warranty, which has been quite profitable, running at decent loss ratios. That’s driving growth in that area. I believe you mentioned something about our press release regarding pricing conditions and that relates primarily to our Home Warranty segment. While auto warranty continues to see upward momentum, our Home Warranty business primarily relies on real estate agents, much like our Title Insurance business, and has been dependent on real estate transaction activity. Currently, we've seen some declines in that segment due to the position we find ourselves in the real estate cycle. However, we are hopefully feeling the real estate market starting to improve.

Thank you.

Auto Warranty is up, Home Warranty is down a bit.

Fair enough. I feel like I should filibuster until I get the fire department running by you. But I just wanted to pivot. Carolyn, I know you guys, here we are at the end of October, you're starting to prepare budgets for next year. I'm not sure what the outlook is for both new and refinancing activities. Maybe you could provide us a snapshot of how you're thinking about it through your crystal ball.

Sure, Greg. This year, every quarter, we've seen a slight increase in our orders that we track through our direct operations. It's a positive sign. However, it's difficult to forecast precisely what will happen. If we continue to see positive increases quarter-over-quarter this year, many believe we will start seeing some recovery later in 2025, and 2026 should be when it really begins having a larger effect on us. But it's just so hard to predict anymore. I wouldn't have thought that when this first started we would be where we are now, but the situation has been unpredictable nearly month-to-month in the real estate cycle.

As a related question, looking at the expense ratio, let's examine the nine-month expense ratio of 95.4. I remember several quarters ago, perhaps a year back, your target for this period was slightly lower. Should I consider that expense ratio as a benchmark until conditions improve, or do you have another recommendation?

It's challenging to predict. Much of what influences our expense ratio pertains to fees and services related to producing orders, establishing upfront expenses that take time to recover. We require revenue from these orders to counterbalance our expenses. Additionally, as we have progressed through the technology modernization, that also places pressure on our expense ratio.

Okay. Thank you for the follow-up.

Thank you, Greg.

And that concludes our Q&A session. I will now turn the conference back over to management for closing remarks.

Okay. Thank you, everyone, for your interest and time in participating with us. We wish you all the best this fall and look forward to getting back together with you when we can report on our fourth quarter and the final 2024 figures. Again, thank you very much, and have a great day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.