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Old Republic International Corp (ORI -0.03%)
Q2Â 2019 Earnings Call
Jul. 25, 2019, 3:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day, and welcome to the Old Republic International's Second Quarter 2019 Earnings Conference Call. [Operator Instructions]
I will now like to turn the conference over to Marilynn Meek with MWW Group. Please go ahead.
Marilynn Meek -- Investor Relations
Thank you. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss second quarter 2019 results. This morning, we distributed a copy of the first release and posted a separate statistical supplement, which we assume you have seen and/or otherwise have access to during the call. Both of the documents are available at Old Republic's website, which is www.oldrepublic.com.
Please be advised that this call may involve forward-looking statements as discussed in the press release and statistical supplements, dated July 25, 2019. Risks associated with these statements can be found in the Company's latest SEC filings.
This afternoon's conference call will be led by Al Zucaro, Chairman and CEO of Old Republic International Corporation, and several other senior executive members as planned for this meeting.
At this time, I would like to turn the call over to Al Zucaro. Please go ahead, sir.
Aldo Charles Zucaro -- Chairman & CEO
Okay. Thank you, Marilyn, and it's all good, and hello to, everyone. As always, we appreciate very much your joining us in this conversation about Old Republic's latest earnings release. Today, as Marilyn indicated, we've got four of us engaged, Karl Mueller our CFO, and he will provide some insights into the more important elements of overall financial performance and condition of our Company. Then Craig Smiddy, our President, will cover highlights of our general insurance business. Rande Yeager, Executive Chairman of our Title business, will follow that with comments about the recent operations of that segment. And then, I'll join in as the pieces come together.
In approaching today's discussion, we're assuming, as Marilyn said, that everyone has seen the morning's earnings release. And as we've done in past conference calls, we'll also be referring from time-to-time to certain additional statistical information, which is included in the financial supplement that we post each quarter on our website. So, is this slide we're also assuming, therefore, that everyone has access to this posting on their computer.
If we look at the total operating picture of our business, we think that page 3 of the release says it all. For the second quarter, year-over-year comparisons of the all important underwriting and related services parts of the business are, as French the say, cum si cum sa, primarily for reasons that Craig will give in a few minutes and as are summarized in the earnings release.
On the other hand, Old Republic's performance in the first three months of this year, combined with the second quarter, did produce first half underwriting results, which were basically flat with those of the same period of 2018.
Again, from an overall operations standpoint, interest and dividend income from our roughly $14 billion investment portfolio, continues to be a bright spot for our Company. For the first half of the year, and particularly this income, as you see, was sufficiently robust as to move the needle, so to speak, to the green range from a pre-tax operating income standpoint.
So as I said a couple of minutes ago, why don't we turn this discussion over to you, Karl. As you address, as we've planned, the highlights of the release from a pure financial perspective. So go ahead.
Karl W. Mueller -- Senior Vice President and Chief Financial Officer
Okay, Al. Yeah. Thank you. I'll speak briefly to the major points concerning Old Republic's consolidated operating results and financial condition. As we show in the table at the top of page 1 in this morning's release, the market value adjustment on the equity security portfolio that since the beginning of 2018 is now recorded through the income statement, that's continued to produce, I guess, what we would consider to be significant volatility in the reported net income. And for the reasons stated in the release, we believe that a better measure of an insurance company's operating performance is income that excludes the effect of all investment gains and losses.
As Al mentioned in his opening comments, the table on page 3 clarifies the key elements of our operating profitability into its three component parts. That being underwriting results, net investment income and interest and other charges. So on that note, this morning we announced second quarter net income that excludes all investment gains and losses of $136.3 million, and that's down about 2.5% from the second quarter a year ago.
However, for the first half of 2019, net income, again, excluding investment gains, was $257.9 million, which reflects a year-over-year increase of 2.5%.
From an underwriting perspective, this year's second quarter consolidated composite ratio, as you see, of 95.2%, ticked up slightly from the second quarter of 2018, and that's primarily due to lower favorable development of prior year reserves. Consolidated expenses stayed relatively in line with premium and fee production for both the quarter as well as the year-to-date periods.
Turning then to our financial condition, you see that cash in invested assets rose to roughly $14 billion at the end of June, and this change was driven by a combination of the investment of positive operating cash flow, which, by the way, totaled $313 million for the first half of this year. And couple that with substantial unrealized market appreciation in both the fixed income as well as the equity security portfolios.
The composition of the portfolio remains relatively consistent with the prior year end, with fixed maturity and short-term investments making up roughly 72% of the total, with the remaining 28% being comprised of dividend paying equity securities. For the second quarter and year-to-date period, consolidated net investment income grew by slightly more than 5.5%, due primarily to growth in the investment base, plus higher dividend income and then, offset to a slight degree by lower yields on the fixed maturity portfolio.
On a consolidated basis, claim reserves continued to develop favorably for all periods presented. This morning's release, along with pages 4 and 5 of the financial supplement that both Marilynn and Al referred to, disclose additional details regarding prior year claim reserve development on the reported claim ratios for our three operating segments, being general, title and mortgage insurance.
Old Republic's book value per share increased to $19.68, or roughly a 14% increase for the first six months of this year. The primary drivers of this change in book value are shown on page 9 of this morning's release.
The lower debt to capitalization ratio at the end of June, which is also shown at the bottom of page 9, is reflective of a slightly declining debt balance, compounded by growth in the common shareholders equity account.
We'd also like to point out that the consolidated results for the first half of 2019 benefited by the elimination of roughly $4 million of interest expense that was attributable to the conversion of the remaining outstanding convertible notes and that occurred in the first quarter of 2018.
So overall, Old Republic's balance sheet remains in very strong condition. The Company is well capitalized and positioned for continued growth.
So on that note, Craig, I'm going to turn things over to you to comment on the General Insurance Group.
Craig Richard Smiddy -- President & Chief Operating fficerO
All right. So as the release indicates, the General Insurance Group saw continuing quarter-over-quarter growth in net premiums earned, as well as total operating revenues. Although quarter-to-quarter earning comparisons reflected a decline, year-to-date earnings have grown by a strong 12.1% when compared to the same period in 2018.
As can be seen in the financial supplement, quarter-over-quarter net premiums earned in commercial auto rose by 7.9%, reflecting the positive effect of cumulative rate increases, somewhat offset by a decline in the exposure base due to lower US freight shipments when comparing 2019 to 2018. That can also be seen in the financial supplement. Workers compensation experienced a 1.7% drop in net premiums earned, resulting from rate decreases that correspond with lower claim frequency trends of the past two years.
Quarter-over-quarter, the Group's overall composite ratio rose slightly to 98.1%, while year-to-date it stands at a lower 96.7% compared to 97.4% for the same period in 2018. The Group's expense ratio came in at an elevated 26.7% for the second quarter, while the year-to-date ratio is relatively stable in comparison with 2018. The higher expense ratio in the latest quarter is largely due to differences in the mix of business and differences in the timing of certain expenses.
Okay. So, turning now to claim ratios shown in the financial supplement, our second quarter commercial auto claim ratio held relatively steady, with the year-to-date ratio and the 2018 year-end ratio. Even though we have been achieving strong rate increases for several years, the systemic increase in claims severity trends in the US commercial auto still persists and we're prepared to continue to respond commensurately until such time these trends abate and we see that ratio come into line with our target in the low 70s.
Just adding a little more color on this severity, vehicle repair costs continue to edge higher due to expensive technology components, while bodily injury settlements are higher as a result of more aggressive plaintiff attorney tactics and ensuing litigation.
Moving to workers compensation, the second quarter's claim ratio declined quarter-over-quarter and year over year. And obviously, this is a continuing trend that we're very pleased with. In the financial supplement, we also show claims ratio for commercial auto, workers comp and GL combined, given that we typically provide these coverages together to an account. So for these coverages combined, the second quarter's claim ratio held relatively steady with again the year-to-date ratio and the 2018 year-end ratio.
Still looking at the financial supplement, we note that the financial indemnity claim ratio for the second quarter came back into line, closer to our long term average. We think this reflects the actions we've taken to address the higher incidence of guaranteed asset protection claims that we've seen as indirect result of higher vehicle repair costs and also the higher incidence of D&O claims that we've seen stemming from a greater number of security class action lawsuits.
All of the claim ratios we report on are, of course, inclusive of favorable and unfavorable development. And in the latest quarter, we saw negligible unfavorable development of 0.5 percentage points, while year-to-date the development was favorable by 0.4 percentage points. So we don't see these outcomes as particularly meaningful.
Generally speaking, we continue to grow the General Insurance Group, making investments in people, products, technology. We continue to proactively respond to trends we're observing, all while remaining focused on bottom line underwriting profitability as we've always done.
So on this note, I'll turn the discussion over to Rande Yeager for his comments on our Title Insurance Group.
Rande K. Yeager -- Executive Chairman, Old Republic Title Companies
As we reported this morning, Title Group's quarterly and year-to-date results were really solid in spite of the market volatility that we saw in the first half of the year. For the fourth consecutive year, it really feels great that we exceeded the $1 billion mark in total revenues as of mid-year. Second quarter revenues actually topped the second quarter records of 2018. If we leave out the adjustments for prior year favorable claim reserve development, the quarter's pre-tax profit was also a new record second quarter Year-to-date, pre-tax operating income was strong at $80.8 million.
According to the Mortgage Bankers Association, total originations were actually down by approximately 5% in the first quarter this year and the second quarter forecast, which we don't have yet, the released forecast, which currently give effect to the impact of lower interest rates, should offset this decline. And as interest rates declined in the second quarter, we realized an immediate impact with the rebound in our direct operations. Our purchased money transactions were up slightly, about 6.5%.
Again, we expect to see a positive impact from lower interest rates on home purchases. As we all know, this last statistic is good for our business as home sales offer greater opportunities for premiums and fees. And while inflationary pressures have slowed in residential sector, the steady increase in the housing prices is having a positive impact on our revenues.
Going to mid-year, at mid-year 2019, agency premiums are off slightly at about 2%, or down 1.7%, 2.4% in the first and second quarters, respectively, because agency premiums lag direct operating revenues by about three months. And we should expect to see a corresponding positive effect of the likely interest rate decline in the near term.
Direct operation revenues were up 4.2% on a year-to-date, with a strong 7.8% increase in the second quarter. About 20% of our premiums and fees are related to the Title Group's commercial market efforts and to a large extent, our commercial operating unit. We truly believe that our success in the commercial side of the business is primarily driven by our exceptional commercial team and to a lesser extent by the continued growth in the real estate sector.
Once again, our favorable claims reserve development benefited our earnings, albeit at a lower positive effect shown in table on page 5 of the release. And we're optimistic that this trend will continue in a measured way. With respect to market share, it's up. According to the American Land Title Association statistics, we had 15.9% in the first quarter and that compares favorably to 15.5% in the first quarter of 2018. For all of 2018 we captured 15.4% of the market, for '17, that number was 15%. We're very happy that these market share gains and I think it's a strong indication that our team's efforts are being recognized and rewarded by customers in the market in general.
Those are the highlights for me. And so, Al, I'm going to turn it back over for you for discussion.
Aldo Charles Zucaro -- Chairman & CEO
Okay. Let's see. Let's just take a quick look at our RFIG run-off business. And as the release shows, the mortgage guarantee and the consumer credit indemnity, CCI, an acronym that we use, parts of this segment continue to reflect, we believe, a very stable, easy as she goes, turn of events. As we've said before, as long as the economy remains on a reasonably even keel with good employment and generally accommodative interest and mortgage rates in particular, we continue to experience a continuation of this stable situation.
Mortgage guarantee margins will necessarily decline gradually as our important infrastructure maintenance costs become somewhat misaligned with the anticipated downturn in the top-line. But having said this, we've got every expectation of posting positive, though again, gradually declining earnings in this MI business portion of the one off. And that's going to occur as we -- with the ultimate burn off of policies in force.
We still think that most of this will take place and should occur by 2022, or thereabouts, but until then, given our expectations of this reasonable continuation of earnings, we think that the MI capital base should continue to build up. And as a consequence, we're very optimistic that we'll come to a very good endgame that produces a most beneficial long-term outcome for all of our stakeholders. As we've said many times before, we very much consider Mi business to be a very valuable and viable franchise, which can either be reactivated to advantage in appropriate outside hands or otherwise run-off to a very sensible economic situation for everyone concerned.
As to the much smaller CCI, consumer credit indemnity, portion of the run-off, we think it will just mosey along in a reasonably profitable way as it also experiences a quickening burn-off of policies in force. So all in all, we think we are out of the woods in regards to these RFIG run-offs. And as I say, it can be expected to proceed going forward in a very uneventful workout of its remaining contractual obligations.
So, now when we join together everything under Old Republic's umbrella, we feel very good about our situation and our longer term prospects. System-wise, our focus on the core underwriting and related services disciplines, as both Craig and Rande have spoken too, our business remains unchanged in terms of this focus.
And again, as Page 3 of the release shows, the consolidated composite ratio of claims and expenses to premiums and fees of about 95.6% for the entire consolidated book of business so far in 2019 is also within reach of the 95% bogey for Old Republic's long tailed mix of combined general and title insurance businesses.
So when we look at our business, we continue to believe that the North American economy in which we are exclusively focused, is likely to remain in a very moderate, though perhaps temporarily slowing growth mode for the foreseeable future. And so, all the reliable quality services we provide to some of that economy's important industry sectors, such as housing and trucking and what have you, that should enable us to grow the consolidated business we think at a faster clip than the US GDP or gross domestic product. We think we can do this on the strength of the very high quality committed intellectual talent of our people, joined as it is to a very strong balance sheet as Karl pointed out.
So all in all, we think that the first half results are a good indicator of where the year as whole is going to end up by the time January 2019 comes along and we again report in a conference call mode.
So on this note, why don't we now turn this visit to the to the planned question-and-answer period. If you will, just address your questions to me and I'll play traffic cop, so to speak, and direct them to one of the four of us.
So, operator, let's move along with that.
Questions and Answers:
Operator
[Operator Instructions] And we will go first to Greg Peters with Raymond James.
Greg Peters -- Raymond James -- Analyst
Good afternoon, Al. I realized this is probably going to be your last investor call. So...
Aldo Charles Zucaro -- Chairman & CEO
How do you know, Greg. I mean Lord willing, I plan to stick around for a while.
Greg Peters -- Raymond James -- Analyst
You did announce a new CEO to take -- and Craig is going to takeover. Anyways, if it's not your last call, I look forward to hearing your voice again, but in the event that it is your last call, I'd like to congratulate you on your successful career.
Aldo Charles Zucaro -- Chairman & CEO
Thank you, Greg. You're very kind.
Greg Peters -- Raymond James -- Analyst
So I'd like to pivot to the typical questions that I ask of you guys following your commentary. First, in the general insurance business, I noted with interest the results that you posted, particularly in the commercial auto and in the general liability pieces, where the claims ratio is elevated relative to the year over year comparison, at least for the quarter and for the six months in commercial auto and just for the quarter in general liability. And I thought I'd give you an opportunity to give us some more color around what's going on there. I know in the commercial auto, you've talked about ultimately getting to a lower claim ratio and it seems like we're on several years of successive rate increases and we're just not getting there. So perhaps an updated view on that would be appropriate.
Aldo Charles Zucaro -- Chairman & CEO
Yeah. Why don't you take it, Craig?
Craig Richard Smiddy -- President & Chief Operating fficerO
Sure. So, Greg, as I said in my earlier comments, the severity that the entire industry is seeing in commercial auto is still there. It's not abating. And I mentioned where it's coming from, and we have, as you duly noted, been achieving significant rate increases for several years that we think are commensurate with what we're seeing in that severity trends. So we're going to keep doing the same thing until that ratio comes back down into the low 70s, as I said. It's a systemic problem and mostly driven by, as I said earlier, the plaintiff attorney tactics that are driving up the costs of bodily injury, settlements, even those that don't get to litigation, it has a knock-on effect there. You may have heard of litigation financing and the other things that the plaintiffs' attorneys are doing, is leveraging technology to share tactics on how to approach claims, sharing information on various insurance carriers and their practices so as to be able to more effectively leverage the insurers. And a lot of them are playing the bad faith card and making policy limit demands, threatening bad faith, and that's escalated as well. So like I say, it's a variety of different tactics that are driving up bodily injury costs. And we're responding and we eventually think this has to abate, and until then, we'll focus on risk selection and pricing.
Greg Peters -- Raymond James -- Analyst
Can you, as a follow up to that, give us an indication on what the pure price or rate change is that you expect to get in '19 and how that compares with what the rate change or price increase you got in 2018 for commercial auto in particular?
Craig Richard Smiddy -- President & Chief Operating fficerO
Sure, Greg. We're getting strong rate increases in the mid teens, and that is a little bit better than what we've had in the last couple of years, but in line with the last few years as well. So, those rate increases, again, are commensurate with the severity trends that we're seeing in the commercial auto sector of the business.
Greg Peters -- Raymond James -- Analyst
So, with that type of rates, and if I look at just the pure growth of net premiums earned in your commercial auto business, it suggests that as you're applying rate, you're also pruning or reunderwriting your portfolio of risks. Is that a fair assessment?
Craig Richard Smiddy -- President & Chief Operating fficerO
Well, that's true. Risk selection is certainly part of the equation when we're underwriting our business, but as I commented on earlier, Greg, in my comments, the freight shipments in the US in 2019 have been considerably less than what they were in 2017 and 2018. 2018 in particular was an extremely strong year for the trucking industry and freight shipments. And then, in 2019, that has turned the other direction and it's created a lot of pressure on the trucking industry in '19.
Now, even though there have been some reports of smaller trucking companies having problems, there's also recent reports that perhaps we've turned the corner. So, what that all means for us is that, we have an exposure base that is lower in '19 than it was in '18 because of that dynamic in the freight shipments within the trucking industry. So, there's more than just risk selection and pruning that is driving the overall premium. It's also the exposure base.
Greg Peters -- Raymond James -- Analyst
Got it. That was very useful knowledge.
Aldo Charles Zucaro -- Chairman & CEO
Let me interrupt just a second. Let me add let me add something here too to what -- and reiterate something that Craig said before and something that we've said consistently over the years. I think, you also need to put all of this in the perspective of the underwriting we perform for the vast majority of our customers, which is that, we write auto liability, trucking operation business together with [Indecipherable] and together with GL more often than not. And therefore, that's why we keep pointing to looking at the loss ratios that are developing for the composite of those three coverages.
And that's an important part of what we do from an underwriting standpoint, mixing and matching coverages from a diversification standpoint, both, again, from the coverage standpoint as well as from an industry standpoint. And so, when you look at those trends, they're not too bad for the three coverages combined. As I say, I'm just reiterating something that Craig said before and that we've said, but I think it's an important point to remember.
Greg Peters -- Raymond James -- Analyst
Thank you. I just have to two more questions. The first would be around the general insurance expense ratio. If I look at the quarter-over-quarter result or the six month results, while quarter-over-quarter it's much higher, just a little bit higher on a six month basis, but still in the context of your 10-year average, above that. Can you provide us some context of what's going on with the expense ratio and how we should think about that going forward?
Aldo Charles Zucaro -- Chairman & CEO
Craig, you want to continue with it.
Craig Richard Smiddy -- President & Chief Operating fficerO
Sure. I'd be happy to. So. Greg, again, I have to refer back to my earlier comments. In the second quarter, the expense ratio was elevated because we did have some mix of business change quarter-to-quarter, but it was also elevated because there are items in there that weren't in there in the second quarter of last year and that's driving the quarter two. Year-to-date, again, we think that expense ratio of 26.1% is well in line with where we were at last year at this time in '18. You see we were at 25.9%. And I would point out to you that last year by year-end, as you can see in the 2018 column, we got down to 25%, which is in our in our target. So there are more expenses in the front end, typically, and by the end of the year, we would hope to see a similar trend as well what we saw last year.
Greg Peters -- Raymond James -- Analyst
Great. Thank you for that additional color. And then, Rande, can you just go through? I know you've talked several quarters, several years about the growing commercial business. Does the loss and expense ratio of your commercial title business vary from how works for the regular or ordinary title business that you guys underwrite?
Rande K. Yeager -- Executive Chairman, Old Republic Title Companies
The simple answer is that we exercise the same caution underwriting commercial deals and residential deals, but we have so many eyes to look into commercial deals on both the customer side and the Company side that they just out of pure -- the everyday business is going to get extra scrutiny and as a result of, looking at those deals so closely, the losses tend to be much lower than what you might experience in other segments of the business. So, yeah, the loss ratios on commercial are very low, and of course, that's benefited the Company over the years, because our commercial business has grown, and about 20% of our premium base is commercial and commercial marketplace has grown a little bit. But I think it's our efforts that have indicated in the earnings release discussion that we've really grown that business to really benefit the Company.
Greg Peters -- Raymond James -- Analyst
Got it. Thanks for your answers.
Aldo Charles Zucaro -- Chairman & CEO
Sure.
Operator
[Operator Instructions] Next, we'll go to Matthew Carletti,with JMP Investment Bank.
Matthew Carletti -- JMP Securities. -- Analyst
Hey. Good afternoon, Al, I got two questions. One's a little higher level and one is just a numbers question. So start with the bigger picture one. You mentioned a little bit in your comments about still having, at least, a couple of options with the MI run off book. One, just to let it play out and earn out and be substantially done in a few years. And the other for there to maybe be a transaction that makes sense sooner. And my question is, it's been a little while since you've -- a little over a year maybe since you kind of started thinking about alternate arrangements. Has there just not been interest? Has there been interest and it just hasn't been at what you would view as the right return or the right long-term outcome for the Company? Any color you can give us there on where you sit on those two paths would be helpful.
Aldo Charles Zucaro -- Chairman & CEO
Well, there's not been interest that would accommodate our expectations for that business and those expectations are colored by our view of what the business can produce. If it's just left alone to the extinction of the in force. So from that standpoint, there's no other way to say it, but whatever interest there has been, has not been palatable to us.
Matthew Carletti -- JMP Securities. -- Analyst
Okay. That's helpful. And my other quick question just on the other income line, $34 million in the quarter. That's the strongest it's been in a number of years. Actually, that might be the strongest ever. Just any color on, is there anything one-time in there, or is that that we are approaching a new higher run rate for that line?
Aldo Charles Zucaro -- Chairman & CEO
I think I believe we've explained, Matt, what's in that line, and that's primarily stemming from the service aspects of our business, a little bit in title and some in our general insurance business, where we have a claims PPA operation that's growing reasonably nicely for us. And so it's a combination of those two elements in title and general insurance that are propping up that one. Okay. We do look to that line too to grow gradually over the next -- for the foreseeable future, because obviously, if we can grow the non-claims exposed portion of our business, that's always a good thing for us to do.
Matthew Carletti -- JMP Securities. -- Analyst
Absolutely. And I was just going to, echo Greg's comments and congratulations on retirement.
Aldo Charles Zucaro -- Chairman & CEO
Okay. Thank you.
Operator
[Operator Instructions] We'll take our next question from Nicholas Calzone with Franklin Templeton.
Nicholas Calzone -- Franklin Templeton -- Analyst
Hi. Good afternoon.
Aldo Charles Zucaro -- Chairman & CEO
Yes, sir.
Nicholas Calzone -- Franklin Templeton -- Analyst
And I'm going to follow up on Matt's question, asked a little bit differently. But could you help us understand your thought process around the potential optionality of maintaining the mortgage insurance business in a run-off? It seems that roughly $480 million of capital dedicated to this segment that's only generating a mid-single digit return and declining, it seems, capital efficient to retain it, even if it's marginally profitable, versus finding a way to accelerate that return of capital or finding a way to redeploy that capital more creatively.
Aldo Charles Zucaro -- Chairman & CEO
Yeah, well, for us, it's basically cash in bank on which we're earning, as you point out, a relatively small base return and it's a matter of time. I mean, as you may know, in the insurance business, we do have to adhere to regulations and we're going to proceed according to a significant degree, we're going to proceed along the lines of what the regulatory requirements are in terms of reducing our capital commitment to that business. The cleanest shot is going to be or could be a simple reinsurance of the remaining risk in force, with a quality mortgage guarantee insurer, which would then free up the Company and enable us to liquefy that capital. That's the way we look at it.
Greg Peters -- Raymond James -- Analyst
Okay. Thanks. Then, as a follow up to that, how would you prioritize the capital redeployment opportunities or return when that capital is ultimately released?
Aldo Charles Zucaro -- Chairman & CEO
Well, as we've said, when we have different options, one of which always is whether it's that capital or any other capital we have, which is to return it to all of our shareholders via a special dividend. And so, that's certainly one of the options we have down the road with respect, as I say, to not just that capital, but any other excess capital that we may benefit from as a result of the continuing profitability and growth of our business.
Greg Peters -- Raymond James -- Analyst
Thanks. And then, switching gears a little bit, and last one, but on a net basis, adverse reserve development was relatively low in the quarter. But can you give us any additional color on the development by coverage to the extent that there were some outliers that netted out that relatively low number?
Aldo Charles Zucaro -- Chairman & CEO
Well, Karl, I want you to take that one. I mean, my recollection is that, you know it's -- listen, every line of business does not act in the same fashion, particularly in our general insurance business. Okay. Some quarters or years we have issues, we may have issues or we may have benefits from developments on workers comp, which are offset by, charges, let's say, in our general liability line, which tends to be very volatile. It's our smallest line of the three lines of our focus.
Sometimes you have things that just happened -- refresh my memory, Craig, was it last year third quarter, when we had some issues with an automobile warranty and gap insurance by virtue of rainstorms and what have you,-which propped up that that loss ratio. So I don't mean to evade the question, but we do have a diversified book of business which is expected to not act in tandem such that the overall results are very palatable as they have become to us from a loss on development standpoint over the last several years. We are experiencing very good results.
And then I might add, not to taint the picture, but when you look at general insurance loss developments in particular, as you may know, the workers comp reserves are discounted among other lines of the business. And the effect of the discount on development can be palatable and can, in fact, create a vision, so to speak, of a adverse development when in fact, none is really occurring. Okay.
So I'll throw all of that up in the air to make a point that just it's difficult for us to pinpoint to any one line of insurance type of coverage as being -- as having the major responsibility for whatever action is taking up in the lost development area. That's the best answer we can give you.
Greg Peters -- Raymond James -- Analyst
Okay. Thanks so much.
Operator
It appears there are no further questions at this time. Mr. Zucaro, I'd like to turn the conference back to you for any additional or closing remarks.
Aldo Charles Zucaro -- Chairman & CEO
Okay. Well, I think we've exhausted our comments. I think we've made all the comments that we thought were important to make at this juncture. And again, we appreciate everyone's interest in Old Republic, and we look forward to our next visit sometimes in January of next year. Having said that, we wish everyone a good afternoon.
Operator
[Operator Closing Remarks]
Duration: 51 minutes
Call participants:
Marilynn Meek -- Investor Relations
Aldo Charles Zucaro -- Chairman & CEO
Karl W. Mueller -- Senior Vice President and Chief Financial Officer
Craig Richard Smiddy -- President & Chief Operating fficerO
Rande K. Yeager -- Executive Chairman, Old Republic Title Companies
Greg Peters -- Raymond James -- Analyst
Matthew Carletti -- JMP Securities. -- Analyst
Nicholas Calzone -- Franklin Templeton -- Analyst
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