Old Republic Posts Loss, Warns of Continued Slump into 2010
Old Republic International Corp. (ORI), which provides residential mortgage insurance as well as title insurance and other real estate transfer-related services, on Thursday reported a quarterly net loss of $126.5 million, or 54 cents per share. "Substantially all the reduced performance stemmed from continued weakness in the company's mortgage guaranty and title insurance lines," Old Republic officials said in the earnings report. "Given the continuing downtrend in U.S. economic activity and the substantial dislocations that have enveloped all organizations with housing and mortgage-lending exposures, it is likely that these factors will exert additional earnings pressures throughout 2009 and, at the least, a part of 2010." The $171.1 million revenue generated by Old Republic's mortgage guaranty business was offset by $178.3 million in losses, while the $160.1 million in revenue realized by its title insurance business faced $19.3 million in losses for the quarter. Old Republic reported a claims ratio of 220.5 percent for its mortgage guaranty business through the fourth quarter, reflecting a "combination of unfavorable loan default trends, greater claim severity caused by the larger insured loan values of recent years, and lessened opportunities to mitigate reported claims." Read the earnings report. Old Republic's fourth-quarter figures reflect an increasingly costly and difficult market for all mortgage insurers. Standard & Poor's Ratings Services in April 2008 downgraded a handful of key insurers, including MGIC Investment Corp. (MTG), PMI Group Inc. (PMI), Radian Group Inc. (RDN) and Old Republic -- whose insurance unit was slashed to AA- from AA -- as the industry came to terms with a housing market slump worse than many had anticipated at that point. MGIC's mortgage insurance business -- which was downgraded at the same time to BBB from A -- reported Monday a net quarterly loss of $273 million — or $2.21 per share — compared to the $1.47 billion net loss in the year-ago quarter. Total fourth-quarter revenues totaled $411.5 million due to increased net premiums, and were negatively affected by fourth-quarter losses of $903.4 million “reflecting the continued increase in the number of delinquent loans,” according to the company’s report. Write to Diana Golobay at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.