Old Republic International Corp. ( ORI) Q4 2010 Earnings Call Transcript January 27, 2011 3:00 pm ET Executives Leslie Loyet – IR, Financial Relations Board Al Zucaro – Chairman and CEO Chris Nard – President Analysts Geoffrey Dunn – Dowling & Partners Beth Malone – Wunderlich Securities Bill Clark – Keefe, Bruyette & Woods Presentation Operator
Al ZucaroThank 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. Read the rest of this transcript for free on seekingalpha.com