On Thursday, Old Republic Intl (NYSE:ORI) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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The full earnings call is available at https://events.q4inc.com/attendee/360186661

Summary

Old Republic International reported a consolidated pre-tax operating income of $238 million, a decrease from $268 million, with a combined ratio of 95.3 compared to 93.6.

Specialty Insurance saw a 2.3% increase in net premiums earned but experienced a decrease in pre-tax operating income to $199 million, with a combined ratio of 95.5.

Title Insurance premiums and fees grew by 10%, resulting in a pre-tax operating income of $56 million, and a combined ratio improvement to 95.1 from 99.

Net operating income for the quarter was $186 million, down from $209 million, with net investment income rising by over 6% due to a larger investment base.

The company experienced favorable prior year development in Title Insurance but unfavorable development in Specialty Insurance, particularly in the runoff transactional risk business.

Book value per share increased by 7.2% since year-end, supported by solid operating earnings and higher investment valuations.

Old Republic expects ECM acquisition to be accretive to earnings and book value, with combined ratios expected between 90 and 95.

Investments in IT systems, data analytics, and AI are driving up the expense ratio, but management views these as necessary for long-term efficiency and competitiveness.

The company is handling market competition by focusing on risk-adequate rates and sees growth potential in their newer specialty operating companies and the ECM acquisition.

Full Transcript

OPERATOR

Well, good day everyone and welcome to the Old Republic Intl 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.

Joe Calabrese

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 Intl's website. Please be advised as this call may involve forward-looking statements. As discussed in the press release dated July 23, 2026, assumptions, uncertainties and risks exist that may cause results to differ materially 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, a 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 Smiddy, President and CEO, Frank Sodaro, 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.

Craig Smiddy, Chief Executive Officer

Okay Joe, thank you, and good afternoon everyone and welcome again to Old Republic's second quarter 2026 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 93.6. 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 7.2%.

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. Specialty's combined ratio was 95.5 compared to 90.7. In Title Insurance, we grew premiums and fees by 10% over the second quarter of 2025 and produced 56 million of pre-tax operating income compared to 24 million. Title's combined ratio was 95.1 compared to 99. We saw some slight unfavorable prior year loss reserve development in Specialty Insurance and consistent favorable prior year development in Title Insurance.

And Frank will provide more details 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.

Frank Sodaro, Chief Financial Officer

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 $0.76 compared to $0.83. Starting with investments, net investment income increased just over 6% 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 experienced last year and General Liability had a moderate level of unfavorable development.

We ended the quarter with book 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 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 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. I'll now turn the call back over to Craig for a discussion of Specialty Insurance.

Craig Smiddy, Chief Executive Officer

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.

The loss ratio for the quarter was 65.9 which included 0.3 percentage points of unfavorable prior year loss reserve development compared to 62.5% 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 the loss ratio came in at 69.4. That's about 1 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 we're 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% 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 continued 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 Monroe, President and CEO, Old Republic National Title Insurance Group

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. And 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 4 percentage points to 92.1% from 96.1% in the second quarter of 2025.

About 2 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 second quarter of 2025, reflecting steady investment yields earned on a slightly higher invested asset base. All these items produced 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 long-term success. And I'll turn it back to Craig now.

Craig Smiddy, Chief Executive Officer

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 in 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.

OPERATOR

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

Greg Peters, Analyst at 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'd 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.

Craig Smiddy, Chief Executive Officer

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 catastrophe-exposed property. And as you know, catastrophe-exposed property is not a big portion of our portfolio. So, when it comes to property rates for us, they've not seen the type of decrease that others have perhaps seen. In total property, we were down about 7 and a half percent in rate.

So when it comes to the newer entities, Old Republic property has not begun 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 package types of business.

And we're able to maintain property rates there much more so than the marketplace is 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.

Greg Peters, Analyst at Raymond James

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, you know, what benchmarks you're looking for in terms of whether they're going to yield the success you're hoping for.

Craig Smiddy, Chief Executive Officer

Sure. I would tell you that when it comes to the expense ratio this quarter compared to the expense ratio last quarter, about a full percentage point of that is being driven by IT systems 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 title, maybe even especially in title with our qual risk 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 to modernize our 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.

Greg Peters, Analyst at Raymond James

Got it. I guess just pivoting to the title business, just, you know, watching with interest the growth in your commercial book, maybe you can just give us a sense of how that is looking for the balance of the year, especially in the context of all these big data center infrastructure projects.

Craig Smiddy, Chief Executive Officer

Et cetera. Carolyn, I'll let you speak to that one, if you would.

Carolyn Monroe, President and CEO, Old Republic National Title Insurance Group

Sure, Greg. We really expect to see commercial continue as it has already this year. You know, data centers are pretty big, but, 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.

Greg Peters, Analyst at Raymond James

Fair enough. Thanks for the detail.

Craig Smiddy, Chief Executive Officer

Thanks, Greg.

OPERATOR

Next up is Paul Newsom from Piper Sandler.

Paul Newsom, Analyst at Piper Sandler

Thanks for the call. A couple, three questions. One is looking at the reserves a little bit. You noted that you had releases in commercial auto, but you also had a higher accident year. Maybe you could parse that away, because oftentimes you don't see them going in opposite directions like that. Could you parse out kind of how that would work in terms of the overall reserves?

Frank Sodaro, Chief Financial Officer

Yeah, sure, sure, Paul. So, you know, at the end of last year, you'll recall we raised the 2025 accident year loss pick in the fourth quarter even though we were putting up favorable prior year development because of our conservative approach. Recall, we saw trends, loss severity trends, specifically through our case reserves increasing. So we took a conservative view and 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 just be conservative and put up a bit of a higher loss pick for '26 as we go in and as we move forward. As you know, we hold our loss picks once we put them up for two or three years on commercial auto, longer on workers' comp and general liability.

But those prior years are developing 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.

Paul Newsom, Analyst at Piper Sandler

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 lapsed 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?

Craig Smiddy, Chief Executive Officer

Yeah, sure. So I'll start and then hand it to Frank as well. We're still looking at share repurchases as a way to return capital to shareholders and we're still in the process of repurchasing shares. And throughout the year, we would expect to continue to do that. Again, we're opportunistic. We look at where we're trading and we're very mindful of being dilutive 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, as we get toward the end of the year and we look at where our capital position is, if we're still in a position where we think we have excess capital, we'll still consider issuing a special dividend.

Frank Sodaro, Chief Financial Officer

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.

Paul Newsom, Analyst at Piper Sandler

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 specialty?

Craig Smiddy, Chief Executive Officer

Yeah. So, Paul, I'm happy to hopefully fill in a little bit of that. Frank talked about the direct written premium, about 220 million last year. And ECM has the exact same combined ratio target 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 and 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.

Paul Newsom, Analyst at Piper Sandler

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

Craig Smiddy, Chief Executive Officer

Thanks, Paul.

OPERATOR

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

Matt Carletti, Analyst at 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.

Craig Smiddy, Chief Executive Officer

Yeah. The ruling obviously put more burden on freight brokers and the freight brokers therefore have more liability exposure than they had in the past. We insure the truckers, the long haul truckers, not 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, freight brokers will, on the flip side, you know, 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.

Matt Carletti, Analyst at Citizens

Gotcha. That's helpful. Thank you. And then maybe just a numbers question you touched on a little bit. Kind of the auto warranty, kind of the benefit had in the quarter, the markup to retail, which, if I'm doing the math right, maybe like 7 points of growth in specialty, 90, 95 million dollars. Is that—do we expect that to repeat? Just a little more color on 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?

Frank Sodaro, Chief Financial Officer

Yeah, great question. And 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 we're growing with, 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 growth in net written premiums because of that nuance with that business. So that's why we referred to the 1.6 number if you take that noise out.

But that will continue to be there as we grow. We are very happy about these new partnerships. Auto warranty, as you can tell from our supplement, performs very well for us. And it's a business that, with the ability to increase scale as we are, it'll be a very profitable segment for us. But it's going to create a little bit of noise and, frankly, we're having some discussions about, as that grows, is there anything else we can do to make sure we're being as transparent as possible on that business and not confusing the numbers with its inclusion, but it will continue.

Matt Carletti, Analyst at Citizens

Gotcha. Okay, that's very helpful. 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.

OPERATOR

Thank you. And as a reminder, everyone, if you have a question today, please press star one. We'll pause for just a moment. And at this time, no one else has signaled. I'll hand the conference back to management for additional or closing remarks.

Craig Smiddy, Chief Executive Officer

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 very solid in specialty insurance and prospects are looking brighter in title insurance. So we'll see you back here after the third quarter and update you again. Thank you very much.

OPERATOR

Once again, ladies and gentlemen, that does conclude today's conference. Thank you all for your participation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.