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Old Republic's Second Quarter Earnings Growth Driven By Strong Gains In General Insurance

July 26, 2002

Net Income Enhanced By Special Tax Recovery

CHICAGO, /PRNewswire-FirstCall/ -- Old Republic International Corporation's (NYSE: ORI), consolidated net operating income per share for this year's second quarter grew by 21.1 percent when compared to that posted in the same period of 2001. For the first half of 2002 net operating earnings per share grew by 20.3 percent.

Net Income and Net Operating Income

Net income for the second quarter of 2002 totaled $107.5 million, or 88 cents per share, vs. $91.5 million, or 76 cents per share, for the year-ago quarter. Net operating income, which excludes realized investment gains or losses, was $104.6 million, or 86 cents per share, compared to $86.0 million, or 71 cents per share in the same quarter of 2001.

For this year's first half, net income was $203.0 million, or $1.67 per share, vs. $175.5 million, or $1.46 per share, for the first six months of 2001, while net operating income was $193.9 million, or $1.60 per share in 2002, compared to $160.5 million, or $1.33 per share in 2001.

Second quarter and first half 2002 tax expense was reduced and net earnings were enhanced by tax and related interest recoveries of $10.9 million, or 9 cents per share, due to the favorable resolution of tax issues dating back to the Company's 1987 tax return.

"Consolidated results for the second quarter reflect the continuation of positive General Insurance underwriting trends, and further improvements in Mortgage Guaranty and Title Insurance income," said Al Zucaro, Chairman and Chief Executive Officer.

Consolidated Revenues

Consolidated operating revenues in this year's second quarter totaled $653.5 million, compared to $580.7 million in the same quarter of 2001. Net premiums and fees were $575.6 million in the second quarter vs. $502.5 million in the year-ago period. Consolidated net investment income was $67.7 million for the second quarter of 2002, 1.2 percent lower when compared to the same period of the preceding year.

For the first half of 2002, consolidated operating revenues were $1.28 billion compared to $1.11 billion for the first six months of 2001. Net premiums and fees for the first six months of 2002 were $1.12 billion compared to $958.8 million in the same year-ago period. Consolidated net investment income for this year's first half was $134.8 million, down by 1.6 percent.

General Insurance Group

The Old Republic General Insurance Group, which markets and underwrites commercial property and liability insurance coverages, posted an increase of 24.2 percent in pretax operating income for this year's second quarter to $45.1 million when compared to the same period in 2001. Net premiums earned in the second quarter of 2002 rose by 17.1 percent to $286.3 million, compared to $244.5 million a year ago. The statutory composite underwriting ratio for this year's second quarter was 98.7 percent vs. 101.2 percent in the same quarter one year ago.

For the first six months of 2002, General Insurance pretax operating income totaled $85.3 million vs. $71.5 million for the first six months of 2001, for an increase of 19.2 percent. Net premiums earned were $555.1 million vs. $476.5 million a year ago, and the composite underwriting ratio was 99.4 percent vs. 102.3 percent one year ago. The improved performance in 2002 periods stemmed from slightly lower claim and expense ratios.

Mortgage Guaranty Group

Old Republic's Mortgage Guaranty Group reported a further improvement in underwriting and related services income for the second quarter of 2002. Pretax mortgage guaranty operating income in the second quarter was $71.5 million vs. $65.6 million in the year-ago quarter, an increase of 8.9 percent. Net premiums earned in the quarter were $91.1 million, up 2.8 percent from $88.6 million in the year-ago quarter. The composite underwriting ratio in the second quarter benefited from a lower claim provision, and dropped to 39.6 percent compared to 43.4 percent in the same quarter of 2001.

For this year's first half, pretax mortgage guaranty operating income rose by 11.6 percent to $141.9 million compared to $127.2 million in the first six months of 2001. Net premiums earned totaled $182.7 million, an increase of 4.4 percent from $175.0 million earned in the first half of 2001. The composite underwriting ratio was 40.3 percent compared to 44.9 percent one year earlier. The improvement in the underwriting ratio for this year's first half also stemmed from lower claim provisions.

Title Insurance Group

The Old Republic Title Insurance Group posted slightly higher pretax operating income of $21.3 million in the second quarter of 2002 from $20.5 million a year earlier. Premium and fee revenues rose by 18.8 percent to $188.3 million in this year's second quarter, while operating expenses reflected a similar 19.0 percent increase. Claim provisions were moderately higher quarter over quarter, as was the case in this year's first three months, and reflected mostly a higher premium volume.

For the first half of the year, premium and fee revenues increased by 29.3 percent to $364.8 million vs. $282.1 million in 2001. First half pretax operating income was $41.5 million up 31.8 percent from $31.5 million in the same period last year. Claim and expense ratio trends for this year's first half were affected by the same factor that applied to the year's second quarter.

Life and Health Group

Old Republic's life and health insurance operations, which represent approximately 2 percent of total revenues, benefited from higher travel accident profitability and lower term life claims experience in the second quarter and first six months of this year. Premium revenues declined slightly in this year's second quarter and first six months due to the lower net sales volume in certain specialty products.

Cash, Invested Assets and Shareholders' Equity

Cash and invested assets at June 30, 2002, totaled $5.77 billion, or $47.92 per share, vs. $5.58 billion, or $46.96 per share, at December 31, 2001, and $5.29 billion, or $44.54 per share, at June 30, 2001. Consolidated operating cash flow was positive at approximately $100.0 million in the latest quarter and $249.7 million for the first half of 2002. The investment portfolio reflects a current allocation of approximately 86 percent in fixed- income investments and 8 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 $2.97 billion at June 30, 2002, vs. $2.78 billion at December 31, 2001, and $2.59 billion at June 30, 2001. Book value per share was $24.70 at the end of this year's second quarter, vs. $23.40 at year-end 2001, and $21.83 at June 30, 2001.

Source: Old Republic International Corporation



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