SECURITIES AND EXCHANGE COMMISSION
OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10 - Q
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1998 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number 0-4625
OLD REPUBLIC INTERNATIONAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware No. 36-2678171
- ------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
307 North Michigan Avenue, Chicago, Illinois 60601
- -------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 312-346-8100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes_X_ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Shares Outstanding
Class June 30, 1998
--------------------------- ---------------------------
Common Stock / $1 par value 137,123,699 *
* Excludes 6,182,878 common shares issued, outstanding and held by an affiliate,
which are classified as treasury stock for financial accounting purposes only.
There are 12 pages contained in this report.
<PAGE>
2
OLD REPUBLIC INTERNATIONAL CORPORATION
Report on Form 10-Q / June 30, 1998
INDEX
- -------------------------------------------------------------------------------
PAGE NO.
--------
PART I FINANCIAL INFORMATION:
CONSOLIDATED SUMMARY BALANCE SHEETS 3
CONSOLIDATED SUMMARY STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO CONSOLIDATED SUMMARY FINANCIAL STATEMENTS 7
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS 8 - 10
PART II OTHER INFORMATION 11 & 12
<PAGE>
3
<TABLE>
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEETS (Unaudited)
($ in Millions)
- -----------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1998 1997
------------ ------------
Assets
<S> <C> <C> <C>
Investments: Held to maturity:
Fixed maturity securities (at amortized cost)
(fair value: $2,397.9 and $2,306.1) $2,341.0 $2,249.7
Other long-term investments (at cost) 23.8 15.4
------------ ------------
Total 2,364.8 2,265.1
------------ ------------
Available for sale:
Fixed maturity securities (at fair value)
(cost: $1,961.3 and $1,954.5) 2,020.5 2,009.9
Equity securities (at fair value) (cost: $101.0 and $60.9) 144.8 117.1
Short-term investments (at fair value which approximates cost) 251.6 328.0
------------ ------------
Total 2,417.0 2,455.2
------------ ------------
Total investments 4,781.8 4,720.4
------------ ------------
Other Assets: Cash 25.2 26.9
Accrued investment income 73.4 72.5
Accounts and notes receivable 319.7 320.0
Reinsurance balances and funds held 84.3 88.5
Reinsurance recoverable: Paid losses 24.0 27.2
Policy and claim reserves 1,300.5 1,333.5
Deferred policy acquisition costs 131.0 126.2
Sundry assets 218.9 207.9
------------ ------------
2,177.4 2,203.0
------------ ------------
Total Assets $6,959.2 $6,923.4
============ ============
- -------------------------------------------------------------------------------------------------------------------------
Liabilities, Preferred Stock and
Common Shareholders' Equity
Liabilities: Future policy benefits $181.1 $183.3
Losses, claims and settlement expenses 3,464.1 3,529.7
Unearned premiums 359.1 375.8
Other policyholders' benefits and funds 57.4 61.1
------------ ------------
Total policy liabilities and accruals 4,061.8 4,150.0
Commissions, expenses, fees and taxes 117.2 124.0
Reinsurance balances and funds 141.2 148.2
Federal income tax payable: Current 8.4 4.3
Deferred 138.7 108.3
Debt and debt equivalents 146.0 142.9
Sundry liabilities 96.8 92.2
------------ ------------
Total liabilities 4,710.4 4,770.2
------------ ------------
Preferred Convertible preferred stock 1.0 1.0
Stock: ------------ ------------
Total preferred stock 1.0 1.0
------------ ------------
Common Common stock 155.5 103.1
Shareholders' Additional paid-in capital 620.4 604.3
Equity: Unallocated shares - ESSOP (5.1) (6.1)
Retained earnings 1,571.1 1,486.8
Accumulated other comprehensive income 57.7 64.4
Treasury stock (at cost) (152.0) (100.5)
------------ ------------
Total common shareholder's equity 2,247.7 2,152.1
------------ ------------
Total Liabilities, Preferred Stock
and Common Shareholders' Equity $6,959.2 $6,923.4
============ ============
See accompanying notes.
</TABLE>
<PAGE>
4
<TABLE>
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED SUMMARY STATEMENTS OF INCOME (Unaudited)
($ in Millions, Except Common Share Data)
- -----------------------------------------------------------------------------------------------------------------
Quarters Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues: Net premiums earned $391.6 $361.8 $751.2 $707.6
Title, escrow and other fees 63.4 40.7 113.3 72.5
Net investment income 67.9 65.9 136.5 133.6
Realized investment gains 5.5 5.3 25.5 16.1
Other income 7.9 18.7 16.4 24.4
------------ ------------ ------------ ------------
Net revenues 536.6 492.6 1,043.1 954.4
------------ ------------ ------------ ------------
Expenses: Benefits, claims and settlement expenses 189.0 192.2 374.7 385.7
Underwriting, acquisition and
insurance expenses 227.7 176.4 425.9 347.2
Interest and other expenses 3.5 3.0 7.1 6.1
------------ ------------ ------------ ------------
Total expenses 420.3 371.8 807.9 739.0
------------ ------------ ------------ ------------
Income before income taxes and items below 116.2 120.8 235.2 215.3
------------ ------------ ------------ ------------
Income Taxes: Currently payable 18.5 19.7 42.1 39.2
Deferred 17.7 13.0 32.0 23.1
------------ ------------ ------------ ------------
Total income taxes 36.2 32.7 74.1 62.3
------------ ------------ ------------ ------------
80.0 88.0 161.0 153.0
Other items - net 0.3 0.2 0.9 0.5
------------ ------------ ------------ ------------
Net Income: $80.4 $88.3 $161.9 $153.5
============ ============ ============ ============
Net Income
Per Share: Basic $0.58 $0.67 $1.17 $1.17
============ ============ ============ ============
Diluted $0.57 $0.62 $1.15 $1.08
============ ============ ============ ============
Dividends Per
Common Share: Cash dividends $0.100 $0.087 $0.187 $0.160
============ ============ ============ ============
Stock dividends --% --% 50% --%
============ ============ ============ ============
Average number of common and common
equivalent shares outstanding:
Basic 137,756,505 130,383,032 138,261,741 130,392,387
============ ============ ============ ============
Diluted 139,993,613 141,494,007 140,435,405 141,789,243
============ ============ ============ ============
See accompanying notes.
</TABLE>
<PAGE>
5
<TABLE>
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
($ in Millions, Except Common Share Data)
- -----------------------------------------------------------------------------------------------------------------
Quarters Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income as reported $80.4 $88.3 $161.9 $153.5
------------ ------------ ------------ ------------
Other comprehensive income, before tax:
Foreign currency translation adjustment (1.0) 2.9 (0.7) 2.5
------------ ------------ ------------ ------------
Unrealized gains (losses) on securities:
Unrealized gains (loses) arising during period 2.8 43.2 16.1 15.1
Less: eliminatin of pre-tax realized gains
included in net income 5.5 5.3 25.5 16.1
------------ ------------ ------------ ------------
Net unrealized gains (losses) on securities (2.7) 37.8 (9.3) (1.0)
------------ ------------ ------------ ------------
Income tax (credits) related to items of other
comprehensive income (1.0) 13.2 (3.3) (0.4)
------------ ------------ ------------ ------------
Comprehensive income $77.5 $115.9 $155.1 $155.5
============ ============ ============ ============
See accompanying notes.
</TABLE>
<PAGE>
6
<TABLE>
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ in Millions)
- ---------------------------------------------------------------------------------------------
Six Months Ended
June 30,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $161.9 $153.5
Adjustment to reconcile net income to
net cash provided by operating activities:
Deferred policy acquisition costs (4.3) (1.8)
Premiums and other receivables 2.2 (0.1)
Unpaid claims and related items (34.7) 22.5
Future policy benefits and policyholders' funds (17.7) (28.0)
Income taxes 37.8 30.9
Reinsurance balances and funds (0.2) (9.1)
Accounts payable, accrued expenses and other 1.0 (15.3)
------------ ------------
Total 145.9 152.4
------------ ------------
Cash flows from investing activities:
Sales of fixed maturity securities:
Held to maturity:
Maturities and early calls 83.7 71.9
Available for sale:
Maturities and early calls 60.1 87.4
Other 77.0 44.9
Sales of equity securities 10.8 16.8
Sales of other investments 2.5 11.3
Sales of fixed assets for company use 0.5 1.6
Purchases of fixed maturity securities:
Held to maturity (175.6) (146.5)
Available for sale (147.6) (185.8)
Purchases of equity securities (51.0) (3.8)
Purchases of other investments (10.8) (1.7)
Purchases of fixed assets for company use (14.4) (5.7)
Purchases of investment in subsidiaries (1.9) ---
Other-net (0.2) (2.1)
------------ ------------
Total (166.7) (111.6)
------------ ------------
Cash flows from financing activities:
Increase in term loans 4.0 10.0
Issuance of preferred and common stocks 14.5 3.9
Issuance of debentures and notes 0.6 116.8
Repayments of term loans --- (42.0)
Redemption of debentures and notes (0.7) (0.8)
Dividends on common shares (25.7) (20.8)
Dividends on preferred shares (0.1) (1.4)
Purchase of treasury stock (51.4) (20.8)
Other-net 1.4 1.7
------------ ------------
Total (57.3) 46.4
------------ ------------
Increase (decrease) in cash and short-term investments (78.1) 87.2
Cash and short-term investments, beginning of period 355.0 301.0
------------ ------------
Cash and short-term investments, end of period $276.8 $388.2
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $4.9 $4.1
============ ============
Income taxes $37.9 $31.1
============ ============
See accompanying notes.
</TABLE>
<PAGE>
7
OLD REPUBLIC INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED SUMMARY FINANCIAL STATEMENTS (Unaudited)
($ in Millions, Except Share Data)
- -------------------------------------------------------------------------------
1. Accounting Policies and Basis of Presentation:
- -------------------------------------------------
The accompanying consolidated summary financial statements have been prepared in
conformity with generally accepted accounting principles as described in the
Corporation's latest annual report to shareholders or as disclosed herein. The
financial accounting and reporting process relies on estimates and on the
exercise of judgement, but in the opinion of management all adjustments,
consisting of normal recurring accruals, necessary to a fair presentation of the
accompanying statements have been reflected therein. Realized gains or losses on
dispositions of investment securities have been reflected in the operating
results for each period presented.
2. Common Share Data:
- ---------------------
Common share data has been retroactively adjusted to reflect a 50% stock
dividend of the Company's common shares approved by the Board of Directors on
March 12, 1998. The following table provides a reconciliation of the income
before extraordinary items and number of shares used in basic and diluted
earnings per share calculations.
<TABLE>
Quarters Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Income before extraordinary item......................... $ 80.4 $ 88.3 $ 161.9 $ 153.5
Less Preferred stock dividends........................... -- .6 .1 1.4
------------ ------------ ------------ ------------
Numerator for basic earnings per share -
income available to common stockholders................ 80.3 87.6 161.8 152.1
Effect of dilutive securities:
Convertible preferred stock dividends.................. -- .6 .1 1.4
------------ ------------ ------------ ------------
Numerator for diluted earnings per share -
income available to common stockholders
after assumed conversions................................ $ 80.4 $ 88.3 $ 161.9 $ 153.5
============ ============ ============ ============
Denominator:
Denominator for basic earnings per share -
weighted-average shares................................ 137,756,505 130,383,032 138,261,741 130,392,387
Effect of dilutive securities:
Stock options .................................. 1,999,091 1,569,534 1,935,647 1,470,410
Convertible preferred stock............................ 238,017 9,541,441 238,017 9,926,446
------------ ------------ ------------ ------------
Dilutive potential common shares....................... 2,237,108 11,110,975 2,173,664 11,396,856
------------ ------------ ------------ ------------
Denominator for diluted earnings per share -
adjusted weighted-average shares and
assumed conversions ................................. 139,993,613 141,494,007 140,435,405 141,789,243
============ ============ ============ ============
Basic earnings per share ................................ $ .58 $ .67 $ 1.17 $ 1.17
============ ============ ============ ============
Diluted earnings per share................................ $ .57 $ .62 $ 1.15 $ 1.08
============ ============ ============ ============
</TABLE>
3. Unrealized Appreciation of Investments:
- -------------------------------------------
Cumulative net unrealized gains on fixed maturity securities available for sale
and equity securities credited to a separate account in common shareholders'
equity amounted to $66.3 at June 30, 1998. Unrealized appreciation of
investments, before applicable income taxes of $36.2, at June 30, 1998 included
gross unrealized gains and (losses) of $108.8 and $(6.2), respectively.
For the six months ended June 30, 1998 and 1997, net unrealized depreciation of
investments, net of deferred income taxes, amounted to $6.0 and $.5,
respectively.
<PAGE>
8
OLD REPUBLIC INTERNATIONAL CORPORATION
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 and 1997
- -------------------------------------------------------------------------------
OVERVIEW
This analysis pertains to the consolidated accounts of Old Republic
International Corporation. The Company conducts its business through four major
segments, namely its General (property and liability coverages), Mortgage
Guaranty, Title, and Life insurance groups.
FINANCIAL POSITION
Old Republic's financial position at June 30, 1998 reflected an increase in
assets of 0.5%, a decrease in liabilities of 1.3%, and an increase in common
shareholders' equity of 4.4% when compared to the immediately preceding
year-end. Cash and invested assets represented 70.1% and 69.6% of consolidated
assets as of June 30, 1998 and December 31, 1997, respectively.
Relatively high short-term maturity investment positions continued to be
maintained as of June 30, 1998 to provide necessary liquidity for specific
operating needs and to enhance flexibility in investment strategy. Changes in
short-term investments reflect a large variety of seasonal and intermediate-term
factors including seasonal operating cash needs, investment strategy, and
expectations as to trends in interest yields. Accordingly, the future level of
short-term investments will vary and respond to the dynamics of these factors
and may, as a result, increase or decrease from current levels. During the first
six months of 1998, the Corporation committed substantially all investable funds
in short to intermediate-term fixed maturity securities. Old Republic continues
to adhere to its long-term policy of investing primarily in investment grade,
marketable securities; the Corporation has not directed its investable funds to
so-called "junk bonds" or derivative types of securities. During the first six
months of 1998, Old Republic's commitment to equity securities increased by
23.6% vis-a-vis the related invested balance at year-end 1997 as a result of
unrealized gains and greater purchases during the first half of 1998. As of June
30, 1998, the carrying value of fixed maturity securities in default as to
principal or interest was immaterial in relation to consolidated assets or
shareholders' equity.
Consolidated operations produced positive cash flows in this year's first half.
The parent holding company has met its liquidity and capital needs principally
through dividends paid by its subsidiaries. The insurance subsidiaries' ability
to pay cash dividends to the parent company is generally restricted by law or
subject to approval of the insurance regulatory authorities of the states in
which they are domiciled. Additionally, the terms of guarantees by the Company
of bank loans to the trustee of the Company's Employees Savings and Stock
Ownership Plan restrict the amount of debt the Company may incur. This covenant
is being met.
Old Republic's capitalization of $2.39 billion at June 30, 1998 consisted of
debt and debt equivalents of $146.0 million, convertible preferred stock of $1.0
million, and common shareholders' equity of $2.24 billion. The increase in the
common shareholders' equity account during the six months ended June 30, 1998
reflects primarily the retention of earnings in excess of dividends declared on
outstanding preferred and common shares offset to some degree by the
reacquisition of $51.4 million worth of common shares pursuant to a previously
announced plan.
Common share data has been adjusted retroactively to reflect a 50% stock
dividend treated as a 3 for 2 split of the Company's common shares approved by
the Board of Directors on March 12, 1998 and issued on May 4, 1998 to
shareholders of record on April 10, 1998.
RESULTS OF OPERATIONS
Revenues:
Consolidated net premiums and fees earned in the first half of 1998 amounted to
$864.5 million and were 10.8% above the amount reported for the first half of
1997. For the second quarter of 1998, consolidated net premiums and fees earned
amounted to $455.0 million, 13.0% above the amount reported for the second
quarter of 1997. For the second quarter of 1998, the Company's General Insurance
Group posted relatively flat earned premiums growth to $227.7 million due to the
continuation of a soft pricing environment. Premium growth in the Mortgage
Guaranty Group was enhanced by a rise in the amount of renewal business and
market expansion; earned premiums increased by 9.3 % to $72.7 million from $66.5
million in the year-ago quarter. Title Group premium and fee revenues increased
44.8% to $141.5 million in the second quarter of 1998 when compared to the same
quarter of 1997. The Mortgage Guaranty Group and the Title Group benefitted from
low interest rates and high employment trends, as well as moderately greater
appreciation of home prices. The Life and Health Group's premium volume
increased to $13.0 million, a 21.2% increase when compared to the same quarter
of 1997.
<PAGE>
9
The General Insurance Group's net premiums earned decreased 1.1% to $436.7
million in the first half of 1998. The Mortgage Guaranty Group continued to
experience volume growth and reported net premiums earned of $144.1 million, an
increase of 9.7%. The Title Insurance Group reported premiums and fees in the
first half of $255.4 million, up from $181.5 million in the year-ago period.
Life and health premiums also rose 10.0% to $28.2 million during the same 1998
period, but remained at approximately 3% of consolidated premiums and fees.
Consolidated net investment income was $136.5 million in the first half of 1998
and $67.9 million in the second quarter of 1998 compared to $133.6 million and
$65.9 million, respectively in the same quarter and six month periods of 1997.
This revenue source was affected by positive consolidated operating cash flows
and by a concentration of investable assets in interest-bearing, fixed maturity
securities. The average annualized yield on investments was approximately 5.8%
and 5.9% at the end of June 30, 1998 and 1997, respectively. This yield pattern
reflects at once the relatively short maturity of Old Republic's fixed maturity
securities portfolio, changes in interest rates at various times and the
commitment of a larger percentage of investable funds to tax-exempt fixed
maturity securities that typically bear lower current yields.
The Company's investment policies have not been designed to maximize realized
investment gains. Realized gains of $25.5 million in the first half of 1998 were
mostly due to the sale of equity securities. In addition to scheduled
maturities, dispositions of securities have been caused principally by calls
prior to maturity by issuers of bonds and notes and by sales of equity
securities. For the first six months of 1998, 65.1% of total dispositions
represented maturities and early calls of existing holdings; for the year 1997
these transactions amounted to 76.9% of the total dispositions.
Expenses:
Consolidated benefit, claim and settlement costs, as a percentage of net
premiums and fees earned, were approximately 43% and 49% in the first six months
of 1998 and 1997, respectively. For the second quarter of each year, these
ratios were 42% in 1998 and 48% in 1997. Consolidated claims experience for
property and liability coverages was basically stable in both periods. Mortgage
Guaranty claim costs were lower during the second quarter and first half of 1998
compared to the same periods in 1997 due to a reduction in expected claims.
Title and Life Group claim costs were stable in the latest quarterly and six
month periods.
The ratio of consolidated underwriting, acquisition and insurance expenses to
net premiums and fees earned were 50% and 45% in the first six months of 1998
and 1997, respectively. These ratios were 51% and 44% for the second quarters of
1998 and 1997, respectively. Variations in these percentages between comparative
periods typically reflect changing patterns in the mix of business and the
varying production costs pertaining thereto. The higher ratios in 1998 periods
reflected the significance of title insurance volume which carries greater
production costs, a rise in mortgage guaranty sales expenses resulting from
higher net costs for providing contract underwriting services, and a relatively
higher expense ratio for property and liability insurance due to flat premium
production trends.
The Company and its subsidiaries have been aware for several years of issues
associated with the inadequacy of programming codes in existing computer systems
for the years 2000 and beyond. The Company's subsidiaries are scheduled to
complete by December 31, 1998, the identification and implementation of changes,
and the testing of systems affected by this year 2000 issue. The costs of
identifying, implementing, and testing the required changes has not been
material to historical operating results. A significant portion of these costs
was not incremental as the Company and its subsidiaries have mostly utilized
existing resources.
Pre-Tax and Net Income:
Income before taxes decreased by 4.1% in the second quarter and increased by
5.2% in the first six months of 1998 when compared to the same periods one year
ago. Excluding the effects of the non-recurring tax-related items recorded in
the second quarter of 1997, income before taxes increased by 7.7% and 12.4% in
the second quarter and first six months of 1998 when compared to the same
periods in 1997. The Corporation's Mortgage Guaranty and Title insurance
segments reflected higher pre-tax operating earnings; the General insurance
segment posted a decrease in pre-tax operating earnings due mainly to poorer
underwriting results; and Life insurance earnings were basically flat.
The effective consolidated income tax rate, excluding the effects of the
non-recurring items, was 31% and 32%, in the second quarter and six month period
of 1998, respectively, and 32% in the second quarter and six month period of
1997, respectively. The rates for each period reflect primarily the varying
proportions of pre-tax operating income derived from tax-sheltered investment
income (principally tax-exempt interest) on the one hand, and fully taxable
investment and underwriting/service income on the other hand.
<PAGE>
10
OTHER INFORMATION
Historical data pertaining to the operating results, liquidity, and other
financial matters applicable to an insurance enterprise such as Old Republic are
not necessarily indicative of results to be achieved in succeeding years. In
addition to the factors cited in the next paragraph, the long-term nature of the
insurance business, seasonal and annual patterns in premium production and
incidence of claims, changes in yields obtained on invested assets, changes in
government policies and free markets affecting inflation rates and general
economic conditions, and changes in legal precedents or the application of law
affecting the settlement of disputed claims all have a bearing on
period-to-period comparisons and future operating results.
Any forward-looking statements contained in this report, of necessity involve
assumptions, uncertainties, and risks that may affect the Company's future
performance. With regard to Old Republic's General insurance segment, its
results can be affected in particular by the level of market competition which
is typically a function of available capital and expected returns on such
capital among competitors, the levels of interest and inflation rates, and
periodic changes in claim frequency and severity patterns caused by natural
disasters, weather conditions, accidents, illnesses and work-related injuries.
Mortgage Guaranty and Title insurance results can be affected by such factors as
changes in national and regional housing demand and values, the availability and
cost of mortgage loans, employment trends, and default rates on mortgage loans;
mortgage guaranty results may also be affected by various risk-sharing
arrangements with business producers. Life and disability insurance results can
be impacted by the levels of employment and consumer spending, as well as
mortality and health trends. At the holding company level, results are generally
affected by the amount of debt outstanding and its cost.
Any forward-looking statements speak only as of their dates. Old Republic
undertakes no obligation to publicly update or revise such statements, whether
as a result of new information, future events or otherwise, and accordingly they
may not be unduly relied upon.
<PAGE>
11
OLD REPUBLIC INTERNATIONAL CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
- -------------------------------------------------------------------------------
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The annual meeting of registrant's shareholders was held on May 22, 1998.
(b) Proxies for the meeting were solicited by management pursuant to Regulation
14A under the Security Exchange Act of 1934. There was no solicitation in
opposition to management's nominees for directors as listed in the proxy
statement and all such nominees were elected.
(c) At the meeting, the shareholders voted on the following matters:
1. The election of four Class II directors. There were at least 85,076,363
affirmative votes for each director and no more than 1,383,681 votes
withheld.
2. An amendment to the registrant's Certificate of Incorporation to
increase the number of authorized shares of Common Stock to 500,000,000
was considered. There were 80,546,408 shares that voted for this
amendment; 5,538,488 shares that voted against this amendment and
375,148 shares that abstained from voting. As a result, this amendment
was approved.
3. An amendment to the registrant's Certificate of Incorporation to
increase the number of authorized shares of Class B Common Stock to
100,000,000 was considered. There were 60,021,171 shares that voted for
this amendment; 25,896,592 shares that voted against this amendment and
542,281 shares that abstained from voting. As a result, this amendment
was approved.
4. An amendment to the registrant's Certificate of Incorporation to remove
the present restriction of one vote per share on the registrant's
Preferred Stock was considered. There were 40,664,882 shares that voted
for this amendment; 38,067,621 shares that voted against this
amendment; 593,053 shares that abstained from voting and 7,134,488
shares that were broker non-votes. As a result, this amendment failed
to be approved.
Item 6 - Reports on Form 8-K
(a) Reports on Form 8-K
1. The registrant has not filed any reports on Form 8-K during the quarter
for which this report is filed.
Items other than those listed are omitted because they are not required.
<PAGE>
12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Old Republic International Corporation
--------------------------------------
(Registrant)
Date: August 13, 1998
------------------
/s/ Paul D. Adams
--------------------------------------
P. D. Adams
Senior Vice President &
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from
Old Republic International's consolidated balance sheet and consolidated
statement of income and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<DEBT-HELD-FOR-SALE> 2,020
<DEBT-CARRYING-VALUE> 2,341
<DEBT-MARKET-VALUE> 2,397
<EQUITIES> 144
<MORTGAGE> 7
<REAL-ESTATE> 0
<TOTAL-INVEST> 4,781
<CASH> 25
<RECOVER-REINSURE> 24
<DEFERRED-ACQUISITION> 131
<TOTAL-ASSETS> 6,959
<POLICY-LOSSES> 3,645
<UNEARNED-PREMIUMS> 359
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0
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751
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