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Old Republic International Corp. (



Q4 2010 Earnings Call Transcript

January 27, 2011 3:00 pm ET


Leslie Loyet – IR, Financial Relations Board

Al Zucaro – Chairman and CEO

Chris Nard – President


Geoffrey Dunn – Dowling & Partners

Beth Malone – Wunderlich Securities

Bill Clark – Keefe, Bruyette & Woods



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Please stand by. Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Old Republic International fourth quarter 2010 earnings call. Today’s call is being recorded. At this time all participants are in a listen-only mode. Following the presentation we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference is being recorded. I would now like to turn the conference over to Leslie Loyet with the Financial Relations Board. Please go ahead.

Leslie Loyet

Thank you. Good afternoon and thank you all for joining us today for the Old Republic conference call to discuss fourth quarter and year-end 2010 results. This morning we distributed a copy of the press release and hopefully you’ve all had a chance to review the results. If there is anyone online who did not receive a copy, you may access it at Old Republic’s Web site at

Please be advised this call may involve forward-looking statements as discussed in the press release dated January 27, 2011. Risk associated with these statements can be found in the company's latest SEC filings. Joining us today from management are, Al Zucaro, Chairman and Chief Executive Officer; and Chris Nard, President. At this time I’d like to turn the call over to Al Zucaro for his opening remarks. Please go ahead.

Al Zucaro

Thank you, Leslie and good afternoon and thanks to everyone for joining us in this usual quarterly review of our business. We’ll assume as we always do that you had a chance to read this morning’s release and that hopefully will make sense to you. As we’ve done in the past, Chris and I will make some comments to perhaps shed some greater light on the release, and then we’ll leave more time for the question-and-answer – questions session.

The picking up from our last quarterly reports, there is very little that’s new in our business except for the final quarter of 2010 which as you saw incorporates the financial accounts of the newest addition to the Old Republic family of companies. And as the release indicates, the PMA merger took effect as of October 1 of last year and therefore as required and appropriate we have included its activities as part of Old Republic from that point forward.

As we have noted in various sections of the release you can readily see that the merger with PMA added about 2.3 business zones or maybe 16% to our pre-merger asset base. And it was also additive to the common equity account pre-merger again to the tune of about $230 million or that’s about a 6% increase over what we had at the end of September.

The release of course also speaks to PMA’s premium and bottom-line effects in the final quarter of 2010 and based on what we know at this moment. The addition of this business to our General Insurance revenue base will be about 20% in 2011, that’s the combination of premiums and net investment income and any kinds of fee income coming from PMA.

So it’s a substantial merger for us. It is the – in historical terms it is the single largest merger that Old Republic have had over all of this years. We think that this merger in particular is very promising in several ways. Most notably, we think it is in the opportunity that it presents to expand PMA’s very viable business Westwood from its – from the long times East Coast base from which it has been operating since it was founded some 95 years ago.

It also provides the benefit to us through some very important industry underwriting specialties that PMA brings to the table and particularly in the healthcare area, the education area, the retail and wholesale trade area, and in some light manufacturing sectors of the American economy.

So, in combination all of this, now we think is very positive and critical from an Old Republic risk management objective standpoint and those objectives in particular have to do with product line diversification as well as our capital allocation and protection processes.

As you see in the release consolidated wise, we experienced again some pretty poor results in the latest quarter, i.e. the fourth quarter of last year and all of 2010. But, fortunately and pleasurably, the damage was a lot less when we compare that to what we sustained in the same timeframes as 2009. As a summary table on the second page of the release shows, the earnings difficulties are still centered primarily on our Mortgage Guaranty business and on the similar – or related consumer credit indemnity coverage that we underwrite in our General Insurance segment.

While the remainder of our General Insurance business and our title insurance line continue to be profitable, both of them nonetheless are performing as levels that are substantially below we believe they are long-term potential as well as in regard to their past history prior to this downturn that we are currently experiencing.

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