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Old Republic Announces Record Quarterly Earnings

April 25, 2002

Each Business Segment Contributes to Earnings Growth

Quarters Ended March 31, 2002 2001 Change

Total Revenues $639.0 $547.5 16.7% Net Operating Income $89.3 $74.4 19.9% Net Income $95.5 $83.9 13.8% Diluted Earnings Per Share: Net Operating Income $0.74 $0.62 19.4% Net Income $0.79 $0.70 12.9%

CHICAGO, April 25 /PRNewswire-FirstCall/ -- Old Republic International Corporation (NYSE: ORI), today announced that its net operating earnings grew by 19.4 percent per diluted share in this year's first quarter. The greatest contributions to the latest quarter's earnings growth came from the Company's title business whose pretax earnings rose by 83.1 percent, quarter over quarter, and mortgage guaranty which posted pretax earnings growth of 14.5 percent. This was followed by Old Republic's general insurance line with pretax income growing by 14.0 percent.

Net Operating Income and Net Income

Excluding realized investment gains and losses, Old Republic's consolidated net operating earnings amounted to $89.3 million, or 74 cents per share, for the first quarter of 2002, versus $74.4 million, or 62 cents per share, for the same period of 2001. Net income, which includes realized investment gains and losses, was $95.5 million, or 79 cents per share, for the first three months of 2002, compared to $83.9 million, or 70 cents per share, in last year's first quarter. Post tax realized investment gains amounted to $6.2 million in this year's first quarter compared to $9.5 million in the same period of 2001.

Consolidated Revenues

Consolidated operating revenues in this year's first quarter totaled $629.3 million, up 18.1 percent from $532.9 million in the same quarter of 2001. Net premiums and fees earned were $551.6 million in the latest quarter versus $456.2 million in the year-ago period. Consolidated net investment income of $67.0 million for the first quarter of 2002 was down slightly when compared to the preceding year due to the prevailing lower yield environment.

General Insurance Group

Old Republic's General Insurance Group, responsible for the Company's property and liability insurance underwriting operations, reported a 14.0 percent increase in pretax operating income to $40.1 million for this year's first quarter compared to $35.2 million during the same period in 2001. Net premiums earned in the first quarter of 2002 were $268.7 million, up 15.8 percent from $231.9 million a year ago. The statutory composite underwriting ratio for the most recent quarter reflected a decline of 3.3 percentage points to 100.1 percent when compared to 103.4 percent posted in the first quarter of 2001, and 102.0 percent for all of last year. The Company believes these more positive underwriting results reflect the improved pricing and risk selection steps that have been undertaken in the past three years.

Mortgage Guaranty Group

The Old Republic Mortgage Guaranty Group's pretax earnings in this year's first quarter were driven mostly by improved underwriting and related services income. Pretax mortgage guaranty operating earnings were $70.3 million in the first three months of 2002, versus $61.5 million in the same quarter of 2001, an increase of 14.5 percent. Net premiums earned in this year's first quarter were $91.6 million, up 6.0 percent from $86.3 million in the year-ago quarter. The composite underwriting ratio in the first three months of 2002 was 41.0 percent compared to 46.6 percent in the same quarter of 2001. Better than expected trends in loan default rates and resumption of payments on loans temporarily in default led to a significant drop in the claim portion of the composite ratio in this year's first quarter. A greater invested asset base in this segment produced 5.9 percent higher investment income contribution when compared to the same quarter of 2001.

Title Insurance Group

In this year's first quarter, Old Republic's Title operations registered a 42.8 percent increase in premium and fee revenues from the first quarter of 2001 results. Operating results were also favorably affected by reasonably low claim costs and good controls on operating expenses. The composite underwriting ratio was 91.8 percent in the first quarter of 2002, down from 95.8 percent in the same period of 2001.

Life and Health Group

Earnings for the Company's Life and Health Group, its smallest segment, grew slightly in this year's first quarterly period. Stable claims experience and a slightly lower expense level were totally responsible for the improvement.

Cash, Invested Assets and Shareholders' Equity

Cash and invested assets at March 31, 2002, totaled $5.70 billion, or $47.40 per share, compared to $5.58 billion, or $46.96 per share, at December 31, 2001, and $5.21 billion, or $43.99 per share, at March 31, 2001. Consolidated operating cash flow continued to be positive in the latest quarter, growing by 71.0 percent to $149.7 million quarter over quarter. The investment portfolio reflects a current allocation of approximately 86 percent in fixed-income investments and 7 percent in equities. As in the past, 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 $2.87 billion at March 31, 2002, compared to $2.78 billion at December 31, 2001, and $2.51 billion at March 31, 2001. Book value per share was $23.90 at the end of March 2002, versus $23.40 at year-end 2001 and $21.25 at March 31, 2001. The latest quarter's change in book value reflects principally the retention of earnings in excess of dividend requirements, partially offset by a decrease in the value of bonds and stocks carried at market values.

Source: Old Republic



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