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 March 31, 2000 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 March 31, 2000
--------------------------- ----------------------
Common Stock / $1 par value 118,534,183
There are 14 pages contained in this report.
<PAGE>
2
OLD REPUBLIC INTERNATIONAL CORPORATION
Report on Form 10-Q / March 31, 2000
INDEX
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PAGE NO.
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PART I FINANCIAL INFORMATION:
CONSOLIDATED SUMMARY BALANCE SHEETS 3
CONSOLIDATED SUMMARY STATEMENTS OF INCOME 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO CONSOLIDATED SUMMARY FINANCIAL STATEMENTS 7 - 9
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS 10 - 12
PART II OTHER INFORMATION 13 & 14
<PAGE>
3
<TABLE>
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED SUMMARY BALANCE SHEETS (Unaudited)
($ in Millions)
- -----------------------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Assets
Investments: Held to maturity:
Fixed maturity securities (at amortized cost)
(fair value: $2,170.8 and $2,229.7) $2,192.6 $2,248.8
Other long-term investments (at cost) 52.9 41.7
---------------- ----------------
Total 2,245.5 2,290.5
---------------- ----------------
Available for sale:
Fixed maturity securities (at fair value) (cost: $2,118.5 and $2,045.5) 2,085.1 2,012.3
Equity securities (at fair value) (cost: $177.1 and $141.9) 187.0 160.1
Short-term investments (at fair value which approximates cost) 244.3 276.5
---------------- ----------------
Total 2,516.4 2,449.0
---------------- ----------------
Total investments 4,762.0 4,739.6
---------------- ----------------
Other Assets: Cash 26.7 17.5
Accrued investment income 69.3 71.3
Accounts and notes receivable 263.9 281.0
Federal income tax recoverable: Current -- 1.4
Reinsurance balances and funds held 66.6 74.8
Reinsurance recoverable: Paid losses 30.7 24.6
Policy and claim reserves 1,336.9 1,350.2
Deferred policy acquisition costs 146.8 151.1
Sundry assets 230.2 226.4
---------------- ----------------
2,171.4 2,198.8
---------------- ----------------
Total Assets $6,933.5 $6,938.4
================ ================
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities, Preferred Stock and
Common Shareholders' Equity
Liabilities: Future policy benefits $120.3 $127.2
Losses, claims and settlement expenses 3,400.2 3,433.7
Unearned premiums 361.0 364.7
Other policyholders' benefits and funds 50.1 52.0
---------------- ----------------
Total policy liabilities and accruals 3,931.8 3,977.8
Commissions, expenses, fees and taxes 132.7 147.3
Reinsurance balances and funds 122.1 120.0
Federal income tax payable: Current 2.2 --
Deferred 217.8 203.0
Debt 254.5 208.3
Sundry liabilities 81.4 82.6
---------------- ----------------
Total liabilities 4,742.8 4,739.2
---------------- ----------------
Preferred
Stock: Convertible preferred stock 0.7 0.7
---------------- ----------------
Common Common stock 120.4 156.6
Shareholders' Additional paid-in capital 191.9 627.8
Equity: Unallocated shares - ESSOP (2.5) (2.5)
Retained earnings 1,913.7 1,873.9
Accumulated other comprehensive loss (23.6) (17.6)
Treasury stock (at cost) (10.0) (439.8)
---------------- ----------------
Total Common Shareholders' Equity 2,189.9 2,198.4
---------------- ----------------
Total Liabilities, Preferred Stock
and Common Shareholders' Equity $6,933.5 $6,938.4
================ ================
</TABLE>
See accompanying notes.
<PAGE>
4
<TABLE>
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED SUMMARY STATEMENTS OF INCOME (Unaudited)
($ in Millions, Except Common Share Data)
- -----------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
March 31,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Revenues: Net premiums earned $380.2 $396.1
Title, escrow and other fees 39.0 57.3
Net investment income 67.8 65.4
Realized investment gains 0.9 14.7
Other income 5.1 7.6
---------------- ----------------
Net revenues 493.2 541.2
---------------- ----------------
Expenses: Benefits, claims and settlement expenses 198.5 200.9
Underwriting, acquisition and
insurance expenses 211.9 231.5
Interest and other expenses 5.0 3.3
---------------- ----------------
Total expenses 415.4 435.8
---------------- ----------------
Income before income taxes and items below 77.7 105.4
---------------- ----------------
Income Taxes: Currently payable 5.6 14.0
Deferred 17.4 18.5
---------------- ----------------
Total income taxes 23.0 32.6
---------------- ----------------
54.6 72.7
Other items - net 0.6 1.0
---------------- ----------------
Net Income: $55.3 $73.8
================ ================
Net Income
Per Share: Basic $0.46 $0.56
================ ================
Diluted $0.46 $0.55
================ ================
Dividends Per
Common Share: Cash dividends $0.130 $0.100
================ ================
Stock dividends --% --%
================ ================
Average number of common and common
equivalent shares outstanding:
Basic 120,878,838 132,581,583
================ ================
Diluted 121,196,969 133,786,003
================ ================
</TABLE>
See accompanying notes.
<PAGE>
5
<TABLE>
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
($ in Millions)
- -----------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
March 31,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Net income as reported $55.3 $73.8
---------------- ----------------
Other comprehensive income (loss):
Foreign currency translation adjustment (0.3) 0.3
---------------- ----------------
Unrealized losses on securities:
Unrealized losses arising during period (7.6) (35.0)
Less: elimination of pre-tax realized gains
included in income as reported 0.9 14.7
---------------- ----------------
Pre-tax unrealized losses on securities
carried at market value (8.5) (49.7)
Deferred income tax credits (2.9) (17.4)
---------------- ----------------
Net unrealized losses on securities (5.5) (32.3)
---------------- ----------------
Net adjustments (5.9) (31.9)
---------------- ----------------
Comprehensive income $49.4 $41.8
================ ================
</TABLE>
See accompanying notes.
<PAGE>
6
<TABLE>
OLD REPUBLIC INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ in Millions)
- -----------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
March 31,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $55.3 $73.8
Adjustment to reconcile net income to
net cash provided by operating activities:
Deferred policy acquisition costs 4.5 (1.9)
Premiums and other receivables 14.3 (9.7)
Unpaid claims and related items (23.0) (14.9)
Future policy benefits and policyholders' funds (8.6) (10.1)
Income taxes 21.6 19.8
Reinsurance balances and funds 4.0 14.9
Accounts payable, accrued expenses and other (7.4) (15.4)
---------------- ----------------
Total 60.7 56.2
---------------- ----------------
Cash flows from investing activities:
Sales of fixed maturity securities:
Held to maturity:
Maturities and early calls 58.1 31.4
Available for sale:
Maturities and early calls 25.9 24.5
Other 30.8 36.9
Sales of equity securities 5.9 11.2
Sales of other investments 0.9 0.2
Sales of fixed assets for company use 0.1 0.2
Purchases of fixed maturity securities:
Held to maturity (2.2) (49.0)
Available for sale (130.2) (121.4)
Purchases of equity securities (41.1) (12.0)
Purchases of other investments (12.1) (8.6)
Purchases of fixed assets for company use (2.9) (4.1)
Proceeds from sale of subsidiary --- 25.3
Cash and short-term investments of subsidiary sold --- (31.4)
Other-net (5.5) (8.9)
---------------- ----------------
Total (72.4) (105.6)
---------------- ----------------
Cash flows from financing activities:
Increase in term loans 47.0 10.0
Issuance of preferred and common stocks 1.4 1.1
Repayments of term loans --- (10.0)
Redemption of debentures and notes (0.5) (0.6)
Dividends on common shares (15.5) (13.1)
Dividends on preferred shares --- ---
Purchase of treasury stock (43.8) (33.8)
Other-net --- 1.4
---------------- ----------------
Total (11.4) (45.1)
---------------- ----------------
Increase (decrease) in cash and short-term investments (23.0) (94.5)
Cash and short-term investments, beginning of period 294.1 400.5
---------------- ----------------
Cash and short-term investments, end of period $271.1 $306.0
================ ================
Supplemental disclosure of cash flow information:
Cash paid during the period for: Interest $1.7 $0.3
================ ===============
Income taxes $1.9 $11.9
================ ===============
</TABLE>
See accompanying notes.
<PAGE> 7
OLD REPUBLIC INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED SUMMARY FINANCIAL STATEMENTS (Unaudited)
($ 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 all stock
dividends and splits. 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.
Quarters Ended
March 31,
--------------------------
2000 1999
----------- -----------
Numerator:
Income before extraordinary item............ $ 55.3 $ 73.8
Less Preferred stock dividends.............. -- --
----------- -----------
Numerator for basic earnings per share -
income available to common stockholders.... 55.3 73.7
Effect of dilutive securities:
Convertible preferred stock dividends....... -- --
----------- -----------
Numerator for diluted earnings per share -
income available to common stockholders
after assumed conversions................... $ 55.3 $ 73.8
=========== ===========
Denominator:
Denominator for basic earnings per share -
weighted-average shares.................... 120,878,838 132,581,583
Effect of dilutive securities:
Stock options............................... 181,595 1,000,773
Convertible preferred stock................. 136,536 203,647
----------- -----------
Dilutive potential common shares............ 318,131 1,204,420
----------- -----------
Denominator for diluted earnings per share -
adjusted weighted-average shares and
assumed conversions......................... 121,196,969 133,786,003
=========== ===========
Basic earnings per share..................... $ .46 $ .56
=========== ===========
Diluted earnings per share................... $ .46 $ .55
=========== ===========
3. Unrealized Appreciation of Investments:
Cumulative net unrealized losses on fixed maturity securities available for
sale and equity securities debited to a separate account in common
shareholders' equity amounted to $15.2 at March 31, 2000. Unrealized
depreciation of investments, before applicable deferred income tax credits
of $8.0, at March 31, 2000 included gross unrealized gains and (losses) of
$45.8 and $(69.1), respectively.
For the quarters ended March 31, 2000 and 1999, net unrealized depreciation
of investments, net of deferred income tax credits, amounted to $5.5 and
$32.3, respectively.
<PAGE>
8
4. Information About Segments of Business
The Corporation's business segments are organized as the General Insurance
(property and liability insurance), Mortgage Guaranty, Title Insurance and
Life Insurance Groups. The contributions of Old Republic's insurance
industry segments to consolidated revenues and operating results, and
certain balance sheet data pertaining thereto are shown in the following
tables on the basis of generally accepted accounting principles ("GAAP").
Each of the Corporation's segments underwrites and services only those
insurance coverages which may be written by it pursuant to state insurance
regulations and corporate charter provisions.
Segment Reporting
- --------------------------------------------------------------------------------
Quarters Ended March 31,
--------------------------
2000 1999
----------- -----------
General Insurance Group:
Net premiums earned........................... $ 210.7 $ 214.0
Net investment income and other income(a)..... 49.0 50.1
----------- -----------
Total...................................... $ 259.8 $ 264.1
=========== ===========
Income before taxes........................... $ 21.8 $ 35.3
=========== ===========
Income tax expense............................ $ 4.4 $ 8.7
=========== ===========
Mortgage Guaranty Group:
Net premiums earned........................... $ 81.2 $ 75.7
Net investment income and other income(a)..... 14.4 14.1
----------- -----------
Total...................................... $ 95.7 $ 89.9
=========== ===========
Income before taxes........................... $ 52.7 $ 39.7
=========== ===========
Income tax expense............................ $ 17.6 $ 13.1
=========== ===========
Title Insurance Group:
Net premiums earned........................... $ 72.4 $ 89.1
Title, escrow and other fees ................ 39.0 57.3
----------- -----------
Sub-total.................................. 111.4 146.4
Net investment income and other income(a)..... 6.1 5.4
----------- -----------
Total...................................... $ 117.5 $ 151.9
=========== ===========
Income before taxes........................... $ 3.2 $ 16.8
=========== ===========
Income tax expense............................ $ .9 $ 5.7
=========== ===========
Life Insurance Group (c):
Net premiums earned........................... $ 15.8 $ 17.2
Net investment income and other income(a)..... 2.1 2.1
----------- -----------
Total...................................... $ 18.0 $ 19.4
=========== ===========
Income before taxes........................... $ .9 $ .4
=========== ===========
Income tax expense............................ $ .3 $ .1
=========== ===========
<PAGE>
9
Reconciliations of Segments to Consolidated
- --------------------------------------------------------------------------------
Quarters Ended March 31,
--------------------------
2000 1999
----------- -----------
Revenues:
Total revenues for reportable segments........ $ 491.1 $ 525.4
Net realized investment gains................. .9 14.7
Other revenues................................ 4.7 2.3
Elimination of intersegment revenues(b)....... (3.5) (1.2)
----------- -----------
Total consolidated revenues................ $ 493.2 $ 541.2
=========== ===========
Income before taxes:
Total income before taxes of
reportable segments......................... $ 78.7 $ 92.4
Net realized investment gains................. .9 14.7
Other sources - net........................... (1.8) (1.6)
Elimination of intersegment profits(b)........ -- (.1)
----------- -----------
Income before income taxes and
extraordinary items........................ $ 77.7 $ 105.4
=========== ===========
- ---------
In the above tables, net premiums earned on a GAAP basis differ slightly from
statutory amounts due to certain differences in calculations of unearned premium
reserves under each accounting method.
(a) Including unallocated investment income derived from invested capital and
surplus funds./(b) Represents results of holding company parent, consolidation
eliminating adjustments, and general corporate expenses, as applicable./(c)In
the first quarter of 1999, the Company sold its New York subsidiary and with it,
its annuity book of business; this had no material effect on Old Republic's
consolidated results or financial position.
<PAGE>
10
OLD REPUBLIC INTERNATIONAL CORPORATION
MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS
Quarters Ended March 31, 2000 and 1999
- --------------------------------------------------------------------------------
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 March 31, 2000 reflected slight decreases
in assets and common shareholders' equity and a slight increase in liabilities
when compared to the immediately preceding year-end. Cash and invested assets
represented 70.1% and 69.6% of consolidated assets as of March 31, 2000 and
December 31, 1999 respectively. Consolidated operating cash flow was positive at
$60.7 million in the latest quarter, compared to $56.2 million in the same
period of 1999.
Relatively high short-term maturity investment positions continued to be
maintained as of March 31, 2000 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 operating cash needs and investment strategy. Accordingly, the
future level of short-term investments will vary and respond to the interplay of
these factors and may, as a result, increase or decrease from current levels.
During the first quarter of 2000, 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; investable funds have not been directed
to so-called "junk bonds" or types of securities categorized as derivatives.
During the first quarter of 2000, Old Republic's investment in equity securities
increased by 16.8% vis-a-vis the related invested balance at year-end 1999 due
to securities acquired but offset in part by unrealized losses during the
period. At March 31, 2000, the Company had no fixed maturity securities in
default as to principal and/or interest.
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 $2.44 billion at March 31, 2000 consisted of
debt of $254.5 million, convertible preferred stock of $.7 million, and common
shareholders' equity of $2.18 billion. The decrease in the common shareholders'
equity account during the quarter ended March 31, 2000 reflects primarily the
retention of earnings in excess of dividend requirements, a moderate decrease in
the value of bonds and stocks carried at market values and the reacquisition of
$43.8 million of common shares to complete a stock repurchase program of $200
million announced in March 1999. In March 2000, the Company cancelled 36.4
million common shares previously reported as treasury stock; this had no effect
on total shareholders' equity or financial condition of the Company.
RESULTS OF OPERATIONS
Revenues:
Consolidated net premiums and fees earned in the first quarter of 2000 amounted
to $419.3 million versus $453.4 million in the year ago period. For the first
three months of 2000, the Company's General Insurance Group reported earned
premium volume of $210.7 million, down 1.5% from $214.0 million a year ago. The
slight drop in premium reflects the Company's firmer underwriting stance in a
marketplace that remains quite competitive. Premiums for the Mortgage Guaranty
Group increased by 7.3% to $81.2 million from $75.7 million in the year-ago
quarter. Title Group premium and fee revenues decreased 23.9% to $111.4 million
in the first quarter of 2000 when compared to the same quarter of 1999 due in
large measure to much lower mortgage refinance activity. Life Group premium
volume decreased to $15.8 million, an 8.2% decline when compared to the same
quarter of 1999.
<PAGE>
11
Consolidated net investment income of $67.8 million in the first quarter of 2000
was up moderately when compared to the preceding year due to a somewhat higher
invested asset base and a slight uptrend in yields obtained on invested and
reinvested assets. The average annualized yield on investments was approximately
5.7% and 5.5% at the end of March 31, 2000 and 1999, respectively. Yield trends
reflect at once the relatively short maturity of Old Republic's fixed maturity
securities portfolio, 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 $0.9 million in the first quarter of 2000
were mostly due to the sale of equity securities. Dispositions of securities are
primarily the result of scheduled maturities of bonds and notes as well as sales
of equity securities. For the first quarter of 2000, 73.2% of total dispositions
represented maturities and early calls of existing holdings; for the year ago
period in 1999, these transactions amounted to 60.3% of the total dispositions.
Expenses:
Consolidated benefit, claim and settlement costs, as a percentage of net
premiums and fees earned, were approximately 47% and 44% in the first quarters
of 2000 and 1999, respectively. Consolidated claims experience for property and
liability coverages was affected mostly by greater loss costs in transportation
insurance lines when compared to the same quarter of 1999. Mortgage Guaranty
claim costs were lower during the first quarter of 2000 vis-a-vis the same
period in 1999 due mostly to stable economic and employment conditions which
usually lead to reduced mortgage defaults. Title claims costs were lower in 2000
as a result of declining claims emergence trends, while Life Group claim costs
were basically flat in the latest quarter.
The ratio of consolidated underwriting, acquisition and insurance expenses to
net premiums and fees earned was approximately 51% in the first quarters of 2000
and 1999. Variations in these ratios reflect a continually changing mix of
coverages sold and attendant costs of producing business. The property and
liability segment's expense ratio increased slightly due to a greater increase
in operating expenses than premium revenues. The Mortgage Guaranty segment's
expense ratio declined moderately. The insurance expense ratio for the title
segment was higher in the first quarter of 2000 compared to the same period in
1999 due in part to a decrease in premium and fees volume without a proportional
reduction in expenses. Consolidated interest and other charges increased $1.7
million in the current quarter versus the same period a year ago due primarily
to interest costs on an increased debt level.
Pre-Tax and Net Income:
Consolidated income before taxes decreased by 26.2% in the first quarter of 2000
when compared to the same period one year ago. The Corporation's Mortgage
Guaranty and Life insurance segments reflected higher pre-tax operating
earnings, while General and Title insurance operations posted reductions in
pre-tax operating earnings in this year's first quarter. Realized gains on sales
of securities were significantly lower in the most recent quarterly period.
The effective consolidated income tax rate was 29.7% and 31.0% in the first
quarters of 2000 and 1999, 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.
Year 2000 Issues:
Year 2000 issues relate primarily to computer programs which were written with
only a two-digit designation for many years. Such programs are often unable to
interpret dates beyond 1999 and as a result may fail or lead to computer errors
which could create a disruption in operations.
Prior to December 31, 1999, the Company and its subsidiaries completed an
implementation of changes and tests of those computer systems and programs that
had been identified as being affected by Year 2000 issues. They also received
confirmations of Year 2000 compliance from certain principal customers, vendors
and other third parties with whom they have significant business relationships.
The Company and its subsidiaries had also developed contingency plans for
operations in the event Year 2000 issues were to arise in spite of the changes
and tests effected.
The costs of identifying, implementing and testing the required changes were not
material to the Company's consolidated operating results. A significant portion
of these costs were not incremental as the Company and its subsidiaries
generally used existing resources.
Early in the current year, no issues are known to have developed nor affect
adversely the Company or any of its subsidiaries. Although the Company considers
it increasingly unlikely, it is possible that Year 2000 issues may have arisen
but are not yet known. The aforementioned contingency plans are deemed
appropriate to address such subsequent events; no significant additional costs
are being anticipated with respect to Year 2000 issues.
<PAGE>
12
OTHER INFORMATION
Reference is here made to "Financial Information Relating to Segments of
Business" appearing elsewhere herein.
Historical data pertaining to the operating performance, 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 below, 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 can have a bearing on period-to-period
comparisons and future operating results.
Any forward-looking commentary or inferences contained in this report involve,
of necessity, 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, as well as 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 as well as the risk
management and pricing policies of government sponsored enterprises. 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, operating earnings or losses are generally affected by the amount
of debt outstanding and its cost, as well as interest income on temporary
short-term investments.
Any forward-looking commentaries speak only as of their dates. Old Republic
undertakes no obligation to publicly update or revise such comments, whether as
a result of new information, future events or otherwise, and accordingly they
may not be unduly relied upon.
<PAGE>
13
OLD REPUBLIC INTERNATIONAL CORPORATION
FORM 10 - Q
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
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>
14
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: May 11, 2000
------------------------
/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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 2,085
<DEBT-CARRYING-VALUE> 2,192
<DEBT-MARKET-VALUE> 2,170
<EQUITIES> 187
<MORTGAGE> 8
<REAL-ESTATE> 0
<TOTAL-INVEST> 4,762
<CASH> 26
<RECOVER-REINSURE> 30
<DEFERRED-ACQUISITION> 146
<TOTAL-ASSETS> 6,933
<POLICY-LOSSES> 3,520
<UNEARNED-PREMIUMS> 361
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 50
<NOTES-PAYABLE> 254
0
0
<COMMON> 120
<OTHER-SE> 2,069
<TOTAL-LIABILITY-AND-EQUITY> 6,933
380
<INVESTMENT-INCOME> 67
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