Old Republic International Corp (ORI) Q2 2026 Earnings Call Transcript

Well, good day, everyone, and welcome to the Old Republic International Second Quarter Earnings Conference Call. Just a reminder that today's call is being recorded. I would now like to hand the call over to Mr. Joe Calabrese. Please go ahead, sir.

Thank you, Lisa. Good afternoon, everyone, and thank you for joining us for the Old Republic Conference Call to discuss second quarter 2026 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release dated July 23rd, 2026. Assumptions, uncertainties, and risks exist that may cause results to differ material from those set forth in these forward-looking statements. For more information on these assumptions, uncertainties, and risks, please refer to the forward-looking statement discussions in the press release and the company's other recent SEC filings and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings. We also may include references to net income excluding net investment gains or net operating income and non-GAAP financial measure. In our remarks or in responses to questions, GAAP reconciliations are included in the press release. Presenting on today's conference call will be Craig Schmitty, President and CEO, Frank Sedaro, Chief Financial Officer, and Carolyn Monroe, President and CEO of Old Republic's National Title Insurance Group. Management will make some opening remarks, and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir.

Okay, Joe, thank you, and good afternoon, everyone, and welcome again to Six earnings call. So in the quarter we produced $238 million of consolidated pre-tax operating income and that compares to $268 million and our consolidated combined ratio was 95.3 and that compares to 93. Our annualized operating return on beginning equity stands at 12.1% and for the first six months of the year growth in book value per share including dividends stands at seven. Specialty insurance grew net premiums earned by 2.3% over the second quarter of 2025 and produced $199 million of pre-tax operating income compared to $254 million. Specialties combined ratio was 95.5 compared to 90.7 in title insurance we grew premiums and fees by 10 percent over the second quarter of 2025 and produced 56 million of pre-tax operating income compared to 24 million titles combined ratio was 95.1 compared to 99. we saw some slight unfavorable prior year loss reserve development and specialty insurance and consistent favorable prior year development in title insurance. And Frank will provide more topics, more details, I should say, on that topic. So I'll turn the discussion over to Frank, and then Frank will turn things back to me to cover specialty insurance, followed by Carolyn, who will discuss title insurance. Frank, it's all yours.

Thank you Craig and good afternoon everyone. This morning we reported net operating income of $186 million for the quarter compared to $209 million last year. On a per share basis comparable quarter over quarter results were 76 cents compared to 83 cents. So starting with investments, net investment income increased just over six percent in the quarter primarily as a result of a larger investment base from strong operating results and our debt issuance that took place in May. Our average rate on corporate bonds acquired during the quarter was 4.9% compared to the average yield rolling off of about 4.2%. The total bond portfolio book yield ended the quarter at 4.8%, which was a slight increase from year end. Turning now to loss reserves. Overall in the quarter, the consolidated combined ratio benefited slightly from favorable development compared to 2.1 points of benefit last year. This was a result of favorable development from title insurance being partially offset by unfavorable development from specialty insurance. While the primary lines of coverage for specialty insurance performed well, its runoff transactional risk business had poor claims experience, which led to reserve strengthening of $40 million in the quarter. Now, as a reminder, we decided to place this business in runoff in 2024. As for the other specialty coverages, property and commercial auto had significant favorable development, and both came in at levels higher than last year. Workers' comp had favorable development that was considerably lower than the large amount of favorable development experience last year, and general liability had a moderate level of unfavorable development. Now, we ended the quarter with booked value per share of $25.33, which, inclusive of regular dividends, represented an increase of 7.2% since year-end. This increase resulted primarily from solid operating earnings and higher investment valuations. In the quarter, we paid nearly $77 million in dividends and repurchased $61 million worth of our shares, leaving us with about $640 million remaining in our current repurchase program. Finally, as a precursor to the next quarter, we expect to report a bargain purchase gain on the ECM acquisition and for ECM's results to be accretive to earnings and book value this year. To put it into perspective, ECM reported direct premiums written in 2025 of just under $220 million, and they ended that year with GAAP equity estimated at $145 million. And I'll turn the call back over to Craig for a discussion of specialty insurance. Okay, Frank, thank you.

Specialty insurance net premiums written were up 1.6% in the quarter after excluding some noise from the write-up to retail premium on the auto warranty business written in our auto warranty operating company. We saw strong rate increases on commercial auto and in general liability, and our overall retention ratios were consistent with what we saw in the first quarter. As I mentioned in my opening remarks, in the quarter specialty insurance pre-tax, operating income was $199 million, while the combined ratio was $95.5 million. The loss ratio for the quarter was $65.9 million, which included 0.3 percentage points of unfavorable prior year lost reserve development compared to 62.5 percent in the second quarter last year, which included 2.9 percentage points of favorable development. Turning to the expense ratio for the quarter, it was 29.6 compared to 28.2 in the second quarter last year. As we've talked about now for a few quarters, our continued investments in the new specialty operating companies, technology modernization, data analytics, and AI accounts for most of that difference in the expense ratio from last year to this year. Looking specifically at commercial auto, the commercial auto net premiums written were up 3.6% in the quarter, while a loss ratio came in at 69.4. That's about one percentage point better than the second quarter last year. And that improvement came from a higher level of favorable prior year loss reserve development, partially offset by a more conservative current accident year loss ratio. Rate increases in commercial auto were in the high teens, a bit higher, than the first quarter and they were greater than the current loss trends were observing commercial auto retention ratios also improved in the quarter as competitors started to catch up with implementing higher rate increases in response to higher loss trends turning to workers compensation net premiums written were 8.4 percent lower in the quarter while the loss ratio came in at 60.6 compared to 48.5 in the second quarter last year with most of that difference due to the higher level of favorable prior year loss reserve development last year. We were able to hold rates flat in the quarter and severity loss trends remained consistent while frequency loss trends continue to decline. So while we're seeing some top-line pressure stemming from generally a competitive marketplace, we remain very focused on risk adequate rates that will continue to produce profitable combined ratios. We also expect to see continuing growth in top-line contributions from our newer specialty operating companies, and the ECM acquisition should contribute to top line and bottom line in the second half of the year as Frank mentioned. We already held a town hall with all of the ECM employees and we'd like to take this opportunity to again welcome ECM to the Old Republic family. So with that, for specialty insurance, I will now turn the discussion over to Carolyn to report on title insurance. Carolyn.

Thank you, Craig, and good afternoon, everyone. Title reported premium and fee revenue for the quarter of $773 million. This represents an increase of 11% from second quarter of 2025. After a slow seasonal start, residential transactions improved a bit this quarter, contributing to our revenue growth as well as strong commercial activity. Premiums produced in our direct title operations were up 6% from second quarter of last year. An agency produced premiums were up 12% and made up 78% of our revenue during the quarter, up from 77% during the same quarter of last year. Commercial premiums increased this quarter and were 25% of our premiums earned compared to 23% in second quarter of last year. During the quarter, we saw a wide mix of transactions across many segments of the commercial sector. Our loss ratio remained consistent this year compared to last year, reflecting our consistent and conservative reserving practices. Our expense ratio improved by four percentage points to 92.1% from 96.1% in the second quarter of 2025. About two points of this improvement relate to a one-time litigation settlement expense that we disclosed in the second quarter of 2025. The rest of the improvement was driven by continued focus on operational efficiency, expense management, and the benefits of higher transaction volumes, slightly offset by higher agent commissions due to a greater weighting of agency business relative to direct. Overall, the quarter's combined ratio was 95.1. This brought our year-to-date combined ratio down to 97.4% as we continue to make progress towards driving our combined ratio below 95%. Investment income was up this quarter by 6% compared to the second quarter of 2025 reflecting steady investment yields earned on a slightly higher invested asset base. All these items produce pre-tax operating income for the quarter of $56 million, up from $24 million in the second quarter of last year. As we move into the second half of 2026, we remain focused on improving operational efficiency and expanding our margins. A key part of that effort is our partnership with Qualia and the continued rollout of our new operating system. Implementation began earlier this year and will continue through the end of next year, strengthening our foundation for a long-term success. And I'll turn it back to Craig now.

Okay, Carolyn, thank you. So while we're seeing some top-line pressure in specialty insurance, we continue to focus on bottom-line combined ratios and the fundamentals in specialty remain strong. In title insurance, we continue to grow with some help from the real estate market, and title's combined ratio continues to improve, and that's in no small part because of Carolyn's leadership and driving operational efficiencies and cost savings. So thank you for that, Carolyn. So with that, we're happy to answer any questions, and either I'll answer your question or I'll ask Frank or Carolyn to respond.

Thank you, sir. And once again, if you have a question, please press star 1. The first question comes from Greg Peters, Raymond James.

Hey, good afternoon. You know, with the companies that have reported so far, there's been a number of comments about increasing intensity of price competition in the marketplace. and certainly you commented on that as well. And what I would like to zero in on is some of the startup new operating companies and how they're faring in an environment which presumably is more competitive. And particularly I'm thinking about the ENS business and the property business, you know, which are areas that have been highlighted by others as having some pretty dramatic price decreases.

Sure, Greg, I'd be happy to comment on that. And I think you're right from everything that I've seen as well. Most of the discussion centers around property and particularly catastrophic. And as you know, a catastrophic exposed property is not a big portion of our portfolio. So, you know, when it comes to, they've not seen the type of decrease that they've seen in percent in rate. When it comes to the newer entities, Old Republic began to write premium. And their marching orders are to build the platform, to build it right, and there is no incentive whatsoever in the first three years to put any premium on the books. So, you know, with that, we're not impacted at all because of not writing any premium, and perhaps the timing will be better by the time we are up and operational. In ENS, again, not focused on catastrophic ENS type of business and writing mostly packaged types of business, and we're able to maintain property rates there much more so than we are or than the marketplaces on the catastrophic business. So, generally, that goes for our other companies as well that are writing property. They're writing it with other lines of coverage and not seeing a big drop-off in rate like you are on Property Cat.

Got it. And, you know, pivoting to the expense side, you know, your expense ratio, as you previewed last quarter, is trending higher this year due to investments. Maybe you could spend a second and just talk to us about how you're measuring the ROI on those investments in technology and what the benchmarks you're looking for in terms of whether they're going to yield the success you're hoping for.

I'll tell you that compared to the expense ratio last quarter, about a full percentage point of that is being driven by IT systems and investments, data and analytic investments, and AI investments. And when it comes to the ROI, you know, I think it's very clear, and we already are experiencing it, even in Tidal, maybe even especially in Tidal, with our QualRisk partnership, where we're able to drive out significant amounts of hours to produce transactions with the use of modern technology that's AI-enabled. So there's no question that we have to make these investments in AI. and I've said it in the past, in order to leverage AI, you have to have data and analytics. In order to have good data and analytics, you've got to have modern IT systems. And frankly, some of the investments we're making in IT systems are ones that we just don't have a choice of. They're operating on mainframe platforms that we just have to replace and modernize. So I think the ROI is just very clear that it's there. We don't have a specific number for you, but there's just no choice that we have systems in order to be able to leverage data and analytics. And we've seen where we have leveraged data and analytics, we're able to perfect pricing to a much greater degree, and we're able to do things with managing claims and losses with that data and analytics. And then, of course, to leverage the ever-changing, rapid environment of AI, you have to lay that on top of your data and analytics and your systems.

So that's how we're looking at it, Greg. got it um i guess uh just pivoting to the title business um just uh you know watching with interest the growth in your commercial book um maybe you can just give us a sense of of um how that is looking for the balance of the year especially in the context of you know all these big data center infrastructure projects etc let you speak to that one if you would sure um greg we really expect to see commercial um continue as it it has already this year um you know data centers are

are are pretty big but um you know with the data centers it takes all the title companies We're all on all of those, and we all have a piece of them. But what we're seeing, a lot of our agents are just really a mix of other industrial projects, you know, hospitality. It's been a real mix, so that gives us, you know, pause to think that this will just continue through the end of the year, since it's not one thing that's going strong right now.

Fair enough.

Thanks for the detail. thanks greg next up is paul newsome from piper sandler um jeff you thanks for the call a couple three questions uh one is uh uh uh looking at the reserves a little bit uh you noted that you had releases in commercial auto but you also had a higher asset year um maybe you could parse that away so that we because oftentimes you you don't see them going in opposite directions like that um could you parse out kind of how that would work um uh in terms of overall reserves yeah sure sure paul um so you know at the end at the end of last year you'll recall we raised the

2025 accident year loss pick in in the fourth quarter even though we were putting up favorable prior year development because of our conservative approach. Recall we saw trends, lost severity trends specifically increasing. So we took a conservative view and it raised the 2025 accident year. So hand in hand with that, when we went in to 26, we said, well, we're going to take the same approach and put up a bit of a higher accident year loss pick for 26 because we saw those trends emerging through at the end of the year. And so we did that. So if you look at where we were at the beginning of 25 when we put up the accident year pick, and then we ended up increasing it a bit by the end of the year when we got to 26 we said okay let's let's just be conservative and put up a bit of a higher loss pick for 26 as we go in and as we move forward um as you know we uh hold our our um our loss picks once we put them up uh for two or three years on commercial auto longer on workers comp and general liability um but those prior years are developing favorable, favorably, indicating that, you know, the picks we've put up are coming in line with what we want to happen. And that is, on average, produce a couple points of favorable prior year loss reserve development.

That makes sense. Different topic. We'll ask a little bit about capital management and the cadence of stock repurchases. Looks like you may have paused a little bit after April, maybe. Anything to read into that? Or any thoughts you can have about sort of how we should think about the pace of stock repurchases and other capital management efforts?

Yeah, sure. So I'll start and then hand it to Frank as well. We're still looking at and still in the process of repurchasing shares and throughout the year continue to do that again we're we're opportunistic we look at where we're trading and and we're very mindful of being diluted to book value per share when we make those repurchases. So opportunistically, we will continue to make repurchases with those factors in mind. And then, as always, we get toward the end of the year and we look at where our capital position is. And if we're still in a position where we think we have excess capital, we'll still consider issuing a special dividend.

And Paul, the only thing I would add to that is this quarter had a little nuance of we were issuing shares related to the ECM acquisition, so we were staying out of the market while that was taking place. So that was another wrinkle in the quarter.

Well, that makes sense. And actually, one more question I'll try to squeeze in here. ECM, as we think about modeling it prospectively, will it have a different underwriting profile, either from a pure underwriting profitability perspective than the rest of the specialty business? And or, you know, is there maybe some other nuances about, you know, expense ratio and loss ratio that we should be mindful of on the margin once the ECM business gets included with the rest of the special business?

Yeah, so a little bit of that. The, you know, Frank premium about $220 million last year, and ECM has the exact same price combined ratio targets that we have for every one of our other companies, and that is somewhere between a 90 and a 95. And I can tell you the first two quarters of this year, they have produced very strong combined ratios, stronger than the prior year. So our expectation of ECM will be that they produce combined ratios between 90 and 95 over the course of time. And as far as the overall growth in premium, they had a quota share in place, so their net premiums were a lot less than the direct, which is why we mentioned the direct premiums. So, we're currently working on including ECM into our corporate treaties, and we will eliminate the external quota share, or already have, effective July 1st. So, hopefully that gives you a little bit of color on how we're thinking about ECM when it comes to top line and bottom line.

That's great. Appreciate the help, as always. Thank you.

Thanks, Paul.

As a reminder, everyone, if you have a question, please press star one on your telephone keypad. Up next is Matt Carletti, Citizens. Thanks. Good afternoon.

Hi, Matt.

Craig, since we last spoke, I think the Supreme Court kind of issued an opinion on liability for freight brokers, which is an area that we don't focus on much, quite honestly, don't know much about. I believe Great West at least has some size business there. And I was hoping that you might be able to shed a little color on kind of the impact that that case might have on that market and how big, if any, it is for Great West, kind of what you're seeing there.

Yeah, the ruling obviously put more burden on freight brokers, and the freight brokers therefore have more liability exposure than they had. And we insure the truckers, the long-haul truckers, not the freight brokers. So, you know, to the extent that the freight brokers will try to work with higher quality companies, given that they now have liability exposure, we think that might bode well for us in that we think that the truckers and the companies we have in the Great West portfolio are higher caliber. And so, to that extent, freight brokers trying to work with insureds that look more like our insureds, we think could be a good thing. Of course, on the flip side, they're going to try to transfer as much of that liability as they can.

But for us, it's not the freight brokers that we're insuring. gotcha that's helpful thank you and then maybe just a numbers question um you talked you touched on a little bit kind of the the auto warranty kind of the benefit it had in the corner the markup to retail which i'm doing the math right maybe like seven points of growth in specialty 90 95 million um is that do we expect that to repeat just a little more color what what what's happening there and is it kind of a seasonal kind of q2 thing or should we kind of expect ongoing impact in some future quarters yeah great question and then I'm actually very

happy you asked it the answer is yes you should expect it to continue and that's good news we have a couple of large significant partnerships that are that we're growing with and and that's why we tried to take out some of the noise around that growth we didn't want to try to overstate the the growth in net written premiums because of that nuance with that business so that's why we gave you know the referred to this the what you take that noise will continue to we are very happy warranty as you can tell from our supplement performs and it's a business that pre-scale as we it'll be a very profitable set but it's going to create a little bit of noise and frankly we're having some discussions is there anything else we can do to make sure we're we're being as transparent as possible on that business and not not confusing

the numbers with its inclusion but it will continue gotcha okay that's very helpful um i'm just looking here yeah i think that's it i think paul and greg covered everything else for me so thank you very much thank you and as a reminder everyone if you have a question today please press star one we'll pause for just a moment at this time no one else has signaled i'll hand the conference back to management for additional or closing remarks okay well just very brief closing.

We want to thank everybody for participating. We want to wish everybody a happy summer, and we feel good about the prospects for the third and fourth quarter this year. As I said, fundamentals are the insurance and prospects. So we'll see you back here and update you again. Thank you.

Once again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation, you may not disconnect.