Old Republic International Corp. (ORI)

Combines Mortgage and CCI Business News Release Conference Transcript

February 22, 2012 3:00 PM ET


Scott Eckstein – Financial Relations Board

Al Zucaro – Chairman and CEO


Bill Laemmel – Divine Capital Markets



At this time, we are about to begin. Good everyone. And welcome to the Old Republic Combines Mortgage and CCI Businesses News Release Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the call over to Mr. Scott Eckstein of the Financial Relations Board. You may begin.

Scott Eckstein

Thank you, Operator. Good afternoon, everyone. And thank you for joining us today for Old Republic’s conference call to discuss news release. Yesterday afternoon we distributed a copy of the press release. If there is anyone online who did not receive a copy, you can access it at Old Republic’s website which is www.oldrepublic.com.

Please be advised this call may involve forward-looking statements as discussed in the press release dated March 21, 2012. Risks associated with these statements can be found in the company’s latest SEC filings.

Joining us today from management is Al Zucaro, Chairman and Chief Executive Officer. 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, Scott, and good afternoon to everybody. The news release we issued yesterday afternoon after the market close. It was issued really as a follow-up to what we’ve been reporting and saying for quite a long time now about our Mortgage Guaranty business and its prospects, as well as the impact it has had on Old Republic’s business during the past four or five years.

I might -- before I go on here I might ask that it would be useful -- I’ll indicate that it might be useful, given how we are approaching this conversation this afternoon. It might be useful to if you have the news release and the exhibits that were posted on the website yesterday afternoon in front of you, as we’ll be referring to them as we go on.

Specifically, what we are saying and what we are confirming through this release is that once again we are firm in the idea that we would not be putting anymore capital in the MI Mortgage Guaranty segment unless, A, we could have written new business in a separately capitalized company; and B, ultimately change the risk management model of the business, which obviously, has shown itself to be quite large for both ourselves and the rest of the Mortgage Guaranty and related industries.

Our ability to remain in the business as is anyway was foreclosed in August of 2011 when the regulators were no longer extend and we understand that we no longer extend a minimum capital waiver pursuant to which we have been operating for couple of years or so.

And our ability to remain into business by writing new production through as we had wanted to do through a separately capitalized insurance subsidiary was similarly foreclosed as we could not obtain permission or as we were not allowed and we understand that as well, to do so, from both regulatory, as well as GSE approved certain points.

And finally, the ability to do anything, but to runoff the business enforce was in case in covenants so to speak, given our agreement to an order of supervision that was issued by our key North Carolina insurance regulatory authority in January of this year.

So starting with the August 2011 event, we obviously began to evaluate all of our options in regard to the Mortgage Guaranty capitalization needs and we looked at that in the context of the state of the MI industry. We looked at it in terms of our best guess about the near and long-term prospects of that industry and of course, in terms of our vision for Old Republic’s long-term underwriting objectives as a well-diversified insurance-based enterprise.

So now we come to this and those options have crystalized to the point where there is no doubt, whatsoever, that our Mortgage Guaranty business together with the much smaller and somewhat related involvement we have in the CCI line will in fact be separated from the Old Republic consolidation within the next several months.

We expect that separation will take place in one or two, or maybe three ways that we are evaluating still, but each whatever way we select will be what we consider to be a most economically efficient from the standpoint of the Old Republic creditors, debt holders and of course, our shareholders.

We’ll report on the actual message we choose to reset the separation as soon as we’re able to close the loop on several necessary regulatory matters that are currently in course of resolution.

A byproduct of the decision to separate those two lines from the Old Republic consolidated business is to -- in our view, is to give much greater clarity to the outlook for the continuing parts of our business and of course, more specifically, our general entitled insurance lines and as well to give greater clarity to the financial condition, the financial flexibility, the liquidity and the dividend paying capacity of the Old Republic holding company system.

Yesterday, as I had said, we posted on our website a statistical set of -- statistical exhibit that’s related to the news release which provides, we think, context to what I just said and as I said earlier hopefully, you’re able to follow this conversation by reference to these schedules that are part of that exhibit.

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