OLD REPUBLIC INTERNATIONAL CORP Q2 2026 earnings call

Thank you, Lisa. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss second quarter 2026 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release dated July 23rd, 2026. Assumptions, uncertainties, and risks exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these assumptions, uncertainties, and risks, please refer to the forward-looking statement discussions in the press release and the company's other recent SEC filings and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings.

We also may include references to net income excluding net investment gains or net operating income, a non-GAAP financial measure, in our remarks or in responses to questions. GAAP reconciliations are included in the press release. Presenting on today's conference call will be Craig Smiddy, President and CEO, Frank Sodaro, Chief Financial Officer, and Carolyn Monroe, President and CEO of Old Republic National Title Insurance Group. Management will make some opening remarks, and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir.

Joe. Thank you, and good afternoon everyone, and welcome again to Old Republic's second quarter 2026 earnings call. In the quarter, we produced $238 million of consolidated pre-tax operating income, and that compares to $268 million. Our consolidated combined ratio was 95.3%, and that compares to 93.6%. Our annualized operating return on beginning equity stands at 12.1%, and for the first six months of the year, growth in book value per share, including dividends, stands at 7.2%. Specialty insurance grew net premiums earned by 2.3% over the second quarter of 2025 and produced $199 million of pre-tax operating income compared to $254 million. Specialty's combined ratio was 95.5% compared to 90.7%. In title insurance, we grew premiums and fees by 10% over the second quarter of 2025 and produced $56 million of pre-tax operating income compared to $24 million. Title's combined ratio was 95.1% compared to 99%.

We saw some slight unfavorable prior year loss reserve development in specialty insurance and consistent favorable prior year development in title insurance. Frank will provide more details on that topic. I'll turn the discussion over to Frank will turn things back to me to cover specialty insurance, followed by Carolyn, who will discuss title insurance. Frank, it's all yours.

Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $186 million for the quarter compared to $209 million last year. On a per-share basis, comparable quarter-over-quarter results were $0.76 compared to $0.83. Starting with investments. Net investment income increased just over 6% in the quarter, primarily as a result of a larger investment base from strong operating results and our debt issuance that took place in May. Our average rate on corporate bonds acquired during the quarter was 4.9% compared to the average yield rolling off of about 4.2%. The total bond portfolio book yield ended the quarter at 4.8%, which was a slight increase from year-end. Turning now to loss reserves. Overall in the quarter, the consolidated combined ratio benefited slightly from favorable development compared to 2.1 points of benefit last year.

This was a result of favorable development from title insurance being partially offset by unfavorable development from specialty insurance. While the primary lines of coverage for specialty insurance performed well, its runoff transactional risk business had poor claims experience, which led to reserve strengthening of $40 million in the quarter. As a reminder, we decided to place this business in runoff in 2024. As for the other specialty coverages, property and commercial auto had significant favorable development, both came in at levels higher than last year. Workers' comp had favorable development that was considerably lower than the large amount of favorable development experienced last year, and general liability had a moderate level of unfavorable development. We ended the quarter with book value per share of $25.33, which inclusive of regular dividends, represented an increase of 7.2% since year-end.

This increase resulted primarily from solid operating earnings and higher investment valuations. In the quarter, we paid nearly $77 million in dividends and repurchased $61 million worth of our shares, leaving us with about $640 million remaining in our current repurchase program. Finally, as a precursor to next quarter, we expect to report a bargain purchase gain on the ECM acquisition and for ECM's results to be accretive to earnings and book value this year. To put into perspective, ECM reported direct premiums written in 2025 of just under $220 million, and they ended that year with GAAP equity estimated at $145 million. I'll now turn the call back over to Craig for a discussion of specialty insurance.

Okay, Frank. Thank you. Specialty insurance net premiums written were up 1.6% in the quarter after excluding some noise from the write-up to retail premium on the auto warranty business written in our auto warranty operating company. We saw strong rate increases on commercial auto and in general liability, and our overall retention ratios were consistent with what we saw in the first quarter. As I mentioned in my opening remarks, in the quarter, specialty insurance pre-tax operating income was $199 million, while the combined ratio was 95.5%. The loss ratio for the quarter was 65.9%, which included 0.3 percentage points of unfavorable prior year loss reserve development, compared to 62.5% in the second quarter last year, which included 2.9 percentage points of favorable development. Turning to the expense ratio for the quarter, it was 29.6% compared to 28.2% in the second quarter last year.

We've talked about now for a few quarters, our continued investments in the new specialty operating companies, technology modernization, data analytics, and AI accounts for most of that difference in the expense ratio from last year to this year. Looking specifically at commercial auto, the commercial auto net premiums written were up 3.6% in the quarter, while the loss ratio came in at 69.4%. That's about 1 percentage point better than the second quarter last year. That improvement came from a higher level of favorable prior year loss reserve development, partially offset by a more conservative current accident year loss ratio. Rate increases in commercial auto were in the high teens, a bit higher than the first quarter, and they were greater than the current loss trends we're observing.

Commercial auto retention ratios also improved in the quarter as competitors started to catch up with implementing higher rate increases in response to higher loss trends. Turning to workers' compensation, net premiums written were 8.4% lower in the quarter, while the loss ratio came in at 60.6% compared to 48.5% in the second quarter last year, with most of that difference due to the higher level of favorable prior year loss reserve development last year. We were able to hold rates flat in the quarter, and severity loss trends remained consistent while frequency loss trends continued to decline. While we're seeing some top-line pressure stemming from generally a competitive marketplace, we remain very focused on risk-adequate rates that will continue to produce profitable combined ratios.

We also expect to see continuing growth in top-line contributions from our newer specialty operating companies, and the ECM acquisition should contribute to top line and bottom line in the second half of the year as Frank mentioned. We already held a town hall with all of the ECM employees, and we'd like to take this opportunity to again welcome ECM to the Old Republic family. With that, for specialty insurance, I will now turn the discussion over to Carolyn to report on title insurance. Carolyn?

Thank you, Craig, and good afternoon, everyone. Title reported premium and fee revenue for the quarter of $773 million. This represents an increase of 11% from second quarter of 2025. After a slow seasonal start, residential transactions improved a bit this quarter, contributing to our revenue growth as well as strong commercial activity. Premiums produced in our direct title operations were up 6% from second quarter of last year, agency-produced premiums were up 12% and made up 78% of our revenue during the quarter, up from 77% during the same quarter of last year. Commercial premiums increased this quarter and were 25% of our premiums earned compared to 23% in second quarter of last year. During the quarter, we saw a wide mix of transactions across many segments of the commercial sector.

Our loss ratio remained consistent this year compared to last year, reflecting our consistent and conservative reserving practices. Our expense ratio improved by 4 percentage points to 92.1% from 96.1% in the second quarter of 2025. About 2 points of this improvement relate to a one-time litigation settlement expense that we disclosed in the second quarter of 2025. The rest of the improvement was driven by continued focus on operational efficiency, expense management, and the benefits of higher transaction volumes, slightly offset by higher agent commissions due to a greater weighting of agency business relative to direct. Overall, the quarter's combined ratio was 95.1%. This brought our year-to-date combined ratio down to 97.4% as we continue to make progress towards driving our combined ratio below 95%.

Investment income was up this quarter by 6% compared to the second quarter of 2025, reflecting steady investment yields earned on a slightly higher invested asset base. All these items produced pre-tax operating income for the quarter of $56 million, up from $24 million in the second quarter of last year. As we move into the second half of 2026, we remain focused on improving operational efficiency and expanding our margins. A key part of that effort is our partnership with Qualia and the continued rollout of our new operating system. Implementation began earlier this year and will continue through the end of next year, strengthening our foundation for our long-term success. I'll turn it back to Craig now.

Okay, Carolyn. Thank you. While we're seeing some top-line pressure in specialty insurance, we continue to focus on bottom-line combined ratios and the fundamentals in specialty remain strong. In title insurance, we continue to grow with some help from the real estate market, title's combined ratio continues to improve. That's in no small part because of Carolyn's leadership in driving operational efficiencies and cost savings. Thank you for that, Carolyn. With that, we're happy to answer any questions, either I'll answer your question or I'll ask Frank or Carolyn to respond.