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Old Republic Reports Continued Growth in Operating Earnings For 2001 Fourth Quarter and Year

January 30, 2002

Financial Highlights (unaudited; amounts in millions except per-share data and percentages; all per-share amounts are stated on a diluted basis

Quarters Ended Dec. 31, Years Ended Dec. 31,
2001 2000 Change 2001 2000 Change
Total Revenues  Net Operating $637.0 $557.4 14.3 % $2,373.4 $2,070.6 14.6 %
Income $ 85.3 $ 76.0 12.3 % $ 330.7 $ 275.6 20.0 %
 Net Income $ 88.9 $ 92.7 -4.0 % $ 346.9 $ 297.5 16.6 %
Diluted Earnings Per Share:
Net Operating Income $ 0.71 $ 0.63 12.7 % $ 2.75 $ 2.29 20.1 %
Net Income $ 0.74 $ 0.77 -3.9 %  2.88 $ 2.47 16.6 %

CHICAGO, /PRNewswire-FirstCall/ -- Old Republic International Corporation (NYSE: ORI ), reported its consolidated operating earnings for the quarter and year ended December 31, 2001, reflected strong contributions by its three largest segments. In the final quarter of the year most of the earnings progress stemmed from Old Republic's Title insurance business, while overall earnings growth for 2001 was fueled by the combined strength of its Title, General, and Mortgage Guaranty segments. "As has been the case for many years, consolidated results for 2001 underlined the benefits of balanced diversification of the Company's insurance and related service offerings," said A. C. Zucaro, Old Republic's chief executive officer.

Net Operating Income and Net Income

Fourth quarter 2001 net operating income, which excludes realized investment gains and losses, was $85.3 million, or 71 cents per share, versus $76.0 million, or 63 cents per share in the year-ago period. Full year net operating income was $330.7 million, or $2.75 per share in 2001, compared to $275.6 million, or $2.29 per share in 2000. All of the growth in 2001 net operating income stemmed from improved underwriting and service income in Old Republic's three largest segments as the benefits of a greater invested asset base on net investment income were negated by a decline in fixed maturity security yields throughout the year.

Net income for the fourth quarter of 2001 totaled $88.9 million, or 74 cents per share, versus $92.7 million, or 77 cents per share, for the year ago-quarter. Net income was $346.9 million for all of 2001, or $2.88 per share, versus $297.5 million, or $2.47 per share, for 2000. While improved underwriting results benefited net operating earnings, lower net gains from largely discretionary and market driven dispositions or valuations of equity and fixed maturity security holdings restrained net income growth rates in both the final quarter and full year 2001.

Consolidated Revenues

Consolidated operating revenues in the fourth quarter of 2001 grew by 18.1 percent to $627.9 million from $531.8 million in the same quarter of 2000. Net premiums and fees amounted to $546.2 million in 2001's final quarter versus $453.0 million in the same year-ago period. Consolidated net investment income of $69.6 million for the fourth quarter of 2001 was basically flat with the same period of 2000.

For all of 2001, consolidated operating revenues rose by 15.1 percent to $2.34 billion when compared to the $2.03 billion registered in the preceding year. Net premiums and fees for 2001 rose to $2.02 billion, up 16.9 percent when compared to $1.73 billion posted in 2000. Consolidated net investment income for 2001 was $274.7 million, level with the amount earned in the preceding year.

General Insurance Group

Old Republic's property and liability insurance business, representing approximately one-half of total revenues, registered much improved underwriting performance for 2001 as a whole. Net premiums earned in the fourth quarter of 2001 rose by 17.9 percent to $266.0 million when compared to $225.7 million for the preceding year. Greater weather- and severity-related claim provisions in the Company's small Canadian truck insurance line in particular led to an increase in the claim ratio for the final quarter of the year, however. The statutory composite underwriting ratio for the year's final quarter was 103.4 percent versus 102.6 percent in the same quarter of 2000, and 101.5 percent for the first nine months of 2001.

For all of 2001, general insurance pretax operating income increased by 21.0 percent to $141.4 million when compared to the $116.9 million posted in 2000. For the first time, net premiums earned crossed the billion-dollar mark growing by 16.6 percent from $857.8 million in the preceding year. The statutory composite underwriting ratio declined by 4.0 percentage points to 102.0 percent in 2001 from 106.0 percent in 2000.

"The Company's greatly improved General Insurance underwriting results for 2001 are very much in line with the expectations we had at the beginning of the year. For the foreseeable future, we believe that ongoing pricing corrections and the application of more stringent underwriting standards should continue to be a positive influence on this segment's operating results. We are well capitalized to finance continued growth as we work to expand our share of the markets in which we operate," said Zucaro.

Mortgage Guaranty Group

Old Republic's Mortgage Guaranty Group once again reported greater income from underwriting and related services for both the quarter and year ended December 31, 2001. Pretax mortgage guaranty operating income was $68.8 million in the final quarter of 2001, versus $63.5 million in the same period one year ago, an increase of 8.3 percent. Net premiums earned in the latest quarter were $91.l million, up 5.6 percent from $86.3 million in the year-ago quarter. The composite underwriting ratio in the fourth quarter was 42.1 percent compared to 45.2 percent in the same quarter of 2000.

For all of 2001, pretax mortgage guaranty operating income totaled $261.9 million versus $240.1 million in 2000, an increase of 9.1 percent. Net premiums earned totaled $353.1 million, an increase of 6.5 percent from $331.4 million earned in all of 2000. The composite underwriting ratio dropped to 43.6 percent in 2001, compared to 44.6 percent a year earlier.

The very positive performance turned in by Old Republic's Mortgage Guaranty segment was mostly the result of record-high new insurance written, lower than expected claim costs, and a moderately lower expense ratio.

Title Insurance Group

Pretax operating income of Old Republic's Title Insurance segment more than doubled to $21.8 million in the fourth quarter of 2001 from $9.8 million earned in the same period of 2000. Net premiums and fees rose by 37.6 percent to $176.7 million in 2001's fourth quarter, and for the entire year they were up by 26.6 percent. Pretax operating income surged by 85.2 percent to $74.6 million in calendar year 2001 from $40.3 million in 2000.

Throughout 2001, Title Insurance results were enhanced by strong revenue growth driven by a boom in refinancing activity, a strong market for new home purchases, and the continuation of favorable claim experience.

Life and Health Group

Old Republic's smallest segment, focused on a limited number of life and health insurance offerings, posted basically level earned premiums in the year and final quarter of 2001. Lower pretax operating income resulted from a somewhat higher benefit and claims provision in 2001's fourth quarter, and a drop in investment income caused by the aforementioned down trend in fixed income security yields on a slightly lower invested asset base.

Cash, Invested Assets and Shareholders' Equity

Cash and invested assets at December 31, 2001, totaled $5.58 billion, or $46.96 per share, versus $5.14 billion, or $43.50 per share, at December 31, 2000. Consolidated operating cash flow was positive at approximately $132.0 million in the latest quarter, and reached a new record of $526.7 million for 2001 as a whole. Comparable figures for the fourth quarter and full year 2000 were $136.5 million and $344.1 million, respectively. The increase in operating cash flow for 2001 was mostly the result of greater contributions by the Company's three largest operating segments.

The invested asset base rose by 8.6 percent to $5.47 billion at year-end 2001 due to the above noted benefit of growing operating cash flow. The investment portfolio reflects a current allocation of approximately 86 percent in fixed-income investments and 7 percent in equities. It contains little or no exposure to real estate investments, mortgage-backed securities, derivatives, junk bonds, private placements or mortgage loans.

Common shareholders' equity was $2.78 billion at December 31, 2001, versus $2.43 billion at December 31, 2000. Book value per share was $23.40 at year- end 2001 versus $20.62 at year-end 2000, an increase of 13.5 percent.

Source: Old Republic International Corporation



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