Old Republic (ORI) Q2 2025 Earnings Transcript

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DATE

Thursday, July 24, 2025, at 7 p.m. ET

CALL PARTICIPANTS

President and Chief Executive Officer — Craig L. Smiddy
Senior Vice President and Chief Financial Officer — Francis C. Sodaro
President, Old Republic National Title Holding Company — Carolyn Monroe

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RISKS

Title Insurance Operating Margin Compression— Title insurance pre-tax operating income declined to $24.2 million in Q2 2025 from $46 million in Q2 2024, while the combined ratio rose to 99.0 in Q2 2025 from 95.4 in Q2 2024, with Carolyn Monroe cited "costs from the settlement of a legal matter" as a primary driver of higher expenses.
Invested Asset Base Decline— Francis Sodaro stated that net investment income growth was "partially offset by a lower invested asset base from returning excess capital," following a $500 million special dividend paid in Q1 2025.

TAKEAWAYS

Consolidated Pre-Tax Operating Income-- $267.5 million in consolidated pre-tax operating income for Q2 2025, up from $253.8 million in Q2 2024, indicating continued growth in overall profitability.
Consolidated Combined Ratio-- 93.6, essentially flat compared to 93.5 in Q2 2024.
Net Operating Income-- $209 million in net operating income for Q2 2025, rising from $202 million in Q2 2024.
Net Investment Income-- Net investment income increased 2.4% in Q2 2025 compared to Q2 2024, with an average bond portfolio reinvestment rate of 5% in Q2 2025 and book yield of 4.7% as of Q2 2025.
Favorable Prior Year Loss Reserve Development-- Contributed a 2.1 percentage-point benefit to the consolidated loss ratio in Q2 2025, largely from specialty insurance (notably workers' compensation), though general liability posted unfavorable development.
Specialty Insurance Net Premiums Earned-- 14.6% growth in specialty insurance net premiums earned in Q2 2025 and segment pre-tax operating income of $253.7 million in Q2 2025, with a combined ratio of 90.7, improved from 92.4 in Q2 2024.
Specialty Insurance Net Written Premiums-- Net written premiums increased by 9% in Q2 2025, supported by renewal retention ratios "north of 85%" across all lines and subsidiaries, according to Smiddy.
E&S Direct Written Premiums-- E&S direct written premiums were up 12% year-to-date through Q2 2025, reflecting expansion in the excess and surplus lines business.
Commercial Auto Net Premiums Written-- Commercial auto net premiums written grew 10% in the second quarter, with a 70.3 loss ratio (down from 72.3) for commercial auto in Q2 2025, compared to Q2 2024, and management implemented approximately 14% rate increases on commercial auto in Q2 2025.
Workers' Compensation Net Premiums Written-- Workers' comp net premiums written decreased 2% in Q2 2025, with loss ratio at 48.5 (improving from 50.7) in Q2 2025; Rates were reported as "relatively flat."
Title Insurance Premiums and Fees Earned-- Title insurance premiums and fees earned rose 5.2% in Q2 2025 compared to Q2 2024, with revenue was $698 million in Q2 2025; agency-produced premiums made up 77% of revenue.
Title Insurance Combined Ratio-- The combined ratio increased to 99 in Q2 2025 from 95.4 in Q2 2024, with operating expenses impacted by legal settlement costs and a higher loss ratio (2.9%, up from 2.3%) compared to Q2 2024.
Title Investment Income-- Title segment investment income increased nearly 12% in Q2 2025 compared to Q2 2024, despite challenging market conditions.
Dividend Activity-- $71 million in regular cash dividends paid in Q2 2025 with no share repurchases during the quarter; $200 million remains under current authorization.
Operating Return on Beginning Equity-- Operating return on beginning equity (non-GAAP) improved to an annualized 14.6%, up from 12.1% in Q2 2024.
AI and Data Analytics Initiatives-- Old Republic hired a corporate-level AI leader and continues to invest in modernized IT and analytics infrastructure to drive operational efficiency and better decision-making.
Cyber and Auto Warranty Businesses-- Auto warranty posted notable growth due to new key partnerships. The cyber insurance subsidiary is prioritizing careful market entry over rapid top-line expansion, with no material premium expected until the beginning of next year.

SUMMARY

Old Republic International's (ORI 0.66%) call revealed persistent profitability in specialty insurance, with expanding E&S premiums and enhanced commercial auto pricing supported strong segment income and improved combined ratios in Q2 2025. Title insurance revenue increased by 5% in Q2 2025, despite flat housing demand, but Legal settlement costs and a higher loss ratio materially compressed margins. Management highlighted disciplined capital management, with a significant special dividend disbursement of $500 million in Q1 2025, limited repurchase activity, and a focused approach to maximizing shareholder value according to market-to-book ratios. The company articulated a measured, data-driven strategy for entering challenging markets -- such as cyber and title -- coupled with a multi-year investment in AI and modern technology infrastructure to enable future operational leverage.

Carolyn Monroe explained that title segment agency premiums grew to 77% of revenue as direct operations expanded modestly and commercial premiums contributed a higher share, increasing from 21% to 23% of earned premiums in Q2 2025.
Renewal retentions north of 85% were attributed to the company's service-centric value proposition and long-term client relationships.
In response to ongoing competitive pressures, Smiddy detailed selective pullbacks in public company D&O lines, choosing rate adequacy over premium growth when necessary, and observed stabilization in rate decreases, as discussed on the Q2 2025 earnings call.
Regarding Texas title rate developments, Monroe clarified, "that rate decrease has not gone into effect because it's been challenged" affirming management's belief that any ultimate rate will remain adequate for the state’s market.
Smiddy noted that opportunities for incremental bond portfolio yield improvement are limited, as "new money rates are coming in on our fixed income portfolio vis-a-vis our average yield on our portfolio that's getting pretty tight."
Smiddy stated the cyber insurance subsidiary will proceed cautiously, with management instructing, "Don't want you to grow too fast. We don't want you to grow into a market that's too competitive."
Citing technology investments, Smiddy described targeted spending on IT modernization, "retiring our legacy technology debt," and reinforcing data analytics to underpin AI initiatives "that are helping us right now with better decision making, better efficiencies."

INDUSTRY GLOSSARY

Combined Ratio: A measure of underwriting profitability calculated as (incurred losses + expenses) divided by earned premiums. Below 100 indicates an underwriting profit.

E&S (Excess & Surplus Lines): Insurance for risks not eligible for coverage in standard markets, often due to unique or higher-risk characteristics.

Book Value Per Share: Total shareholder equity divided by shares outstanding, representing the per-share value of a company's net assets.

Prior Year Loss Reserve Development: Adjustments to previously established loss reserves based on more recent claim trends, where favorable development reduces needed reserves.

Public Company D&O: Directors and Officers insurance written for publicly traded companies, covering management liability exposures.

Full Conference Call Transcript

Craig Smiddy: Alright, Joe. Thank you very much. And good afternoon, everyone. Thank you for joining our call, and welcome again to our second quarter 2025 earnings discussion. Well, our story of strong growth and strong profitability continued through the second quarter of this year. During the second quarter, we produced $267.5 million of consolidated pre-tax operating income, up from $253.8 million in the second quarter of 2024. Our consolidated combined ratio was 93.6 compared to 93.5 in the second quarter of last year. In the specialty insurance, we grew net premiums earned by 14.6% in the second quarter and produced $253.7 million of pre-tax operating income, up from $202.5 million in the second quarter last year.

The specialty insurance combined ratio was 90.7 in the quarter, and that compares to 92.4 in the second quarter of last year. In title, despite the continuation of higher mortgage interest rates and a slow real estate market, the title insurance folks grew premiums and fees earned by 5.2% compared to the second quarter last year, and they produced $24.2 million of pre-tax operating income, down from $46 million in the second quarter last year. The title combined ratio was 99 in the quarter compared to 95.4 in the second quarter of last year. Our conservative reserving practices continue to produce favorable prior year loss reserve development in both specialty insurance and title insurance.

Our balance sheet remains strong, and we continue to invest in our new specialty underwriting subsidiaries as well as in technology and in talent. So with that as opening remarks, I'll now turn the discussion over to Frank, and Frank will then turn things back to me to cover specialty insurance, and then I'll turn things over to Carolyn to cover title insurance, and then we'll open it up to the Q&A part. So with that, I hand it to you, Frank.

Francis Sodaro: Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $209 million for the quarter, compared to $202 million last year. On a per-share basis, comparable year-over-year results showed a 9% increase. Net investment income increased 2.4% as a result of higher yields on the bond portfolio, partially offset by a lower invested asset base from returning excess capital, and that included the $500 million paid as a special dividend during the first quarter of this year. Our average reinvestment rate on corporate bonds during the quarter was 5% compared to the average yield rolling off of about 4%.

The total bond portfolio book yield now stands at 4.7% compared to 4.5% at the end of last year. Turning now to loss reserves, both specialty insurance and title insurance recognized favorable development in the quarter, leading to a benefit in the consolidated loss ratio of 2.1 percentage points compared to 2.2 points last year. Within specialty insurance, workers' comp continued to have strong favorable development and accounted for the majority of the group's total favorable development. Commercial auto and property also had favorable development, while general liability had unfavorable development. However, the year-to-date impact was less than one-half of one percent on the specialty insurance loss ratio.

We ended the quarter with book value per share of $25.14, which inclusive of the regular dividend equated to an increase of just over 12.6%, resulting primarily from our strong operating earnings and higher investment valuations. In the quarter, we paid $71 million of regular cash dividends. We did not repurchase any shares during the quarter, and our repurchases since the end of the quarter were not material. So that left us with just over $200 million remaining in our current repurchase program. I'll now turn the call back over to Craig for a discussion of specialty insurance.

Craig Smiddy: Alright. Thanks, Frank. So specialty insurance net written premiums were up 9% in the second quarter, and that came from strong renewal retention ratios, rate increases on most lines of coverage, and solid new business writings, and an increasing level of premium production in our new specialty underwriting subsidiaries. We continue to expand our E&S presence with E&S direct written premiums up 12% so far this year. As mentioned in my opening remarks, in the second quarter, specialty insurance pre-tax operating income was $254 million, and the combined ratio was 90.7.

The loss ratio for the second quarter was at 62.5, and that included 2.9 percentage points of favorable prior year loss reserve development compared to 64.3 in the second quarter last year that included 2.5 points of favorable development. The expense ratio was in line with expectations, coming in at 28.2 in the second quarter compared to 28.1 in the second quarter last year. So given these top-line and bottom-line results, we continue on our journey of profitable growth within specialty insurance.

Now to just dive into the details a little bit more on commercial auto and workers' compensation, commercial auto net premiums written grew 10% in the second quarter while the loss ratio came in at 70.3 compared to 72.3 last year. Rate increases on commercial auto were approximately 14%, which will keep us ahead of the loss severity trend we're observing. Workers' comp net premiums written were 2% lower in the second quarter while the loss ratio came in at 48.5 compared to 50.7 last year. We saw rates stay relatively flat this quarter, while loss frequency trend continues to decline, and loss severity trend remains stable.

So here, given the higher wage trend within payroll, which is what we apply our rates to, and given the declining loss frequency trend and stable loss severity trend, we think our rate levels for workers' compensation remain adequate. So going forward, we expect solid growth and profitability to continue in specialty insurance throughout the rest of this year, reflecting the success of our specialty strategy and our operational excellence initiatives. We also expect to continue to see growing contributions from our newer specialty underwriting subsidiaries. So that's a high-level summary for the specialty insurance group, and I'll now turn the discussion over to Carolyn, who will report on our title insurance group. Carolyn?

Carolyn Monroe: Thank you, Craig. Title Insurance reported premium and fee revenue for the quarter of $698 million. This represents an increase of 5% from the second quarter of last year. Although we are pleased with continued revenue improvement, we've seen very little change in the real estate and mortgage market conditions. Premium from our direct title operations were up 3% from the second quarter of 2024. Our agency-produced premiums were up 7% and made up 77% of our revenue during the quarter, up from 76% during the second quarter of last year. Commercial premiums increased this quarter and were 23% of our earned premiums compared to 21% in the second quarter of last year.

Investment income was also up this quarter, nearly 12% compared to the second quarter of 2024. Our overall loss ratio increased to 2.9% this quarter compared to 2.3% in the second quarter of last year. Although prior policy years continued to develop favorably, the amount of favorable development in the second quarter of this year was less than the second quarter of 2024. Our pretax operating income this quarter was $24 million compared to $46 million in the second quarter of last year. Our expense ratio was 96.1% compared to 93.1% in the second quarter of 2024. Costs from the settlement of a legal matter were the primary driver of this increase.

Our combined ratio increased to 99% this quarter compared to 95.4% in the second quarter of last year. During the quarter, we continued progressing with the advancement of digital tools and solutions for our directs and our title agents through our strategic partnerships. We remain focused on the importance of providing our agents and employees with the innovative technological solutions required to maintain a competitive edge. These include our internal systems such as our remittance policy assurance and rate engines, to work seamlessly with all the closing and production platforms. And I'll now turn it back to Craig.

Craig Smiddy: Okay. Thanks, Carolyn. So profitable growth continues in specialty insurance, and in title insurance, we remain focused on profitability in a very challenging marketplace. As noted in the financial supplement, annualized operating return on beginning equity improved to an annualized rate of 14.6% compared to an annualized rate of 12.1% in the second quarter last year, which is reflective of our thoughtful management of capital. So that concludes our prepared remarks. And we'll now open up the discussion to Q&A where either I'll answer your questions or I'll ask Frank or Carolyn to help me out.

Operator: To withdraw any questions, please press star one again. Our first question comes from Gregory Peters from Raymond James. Please go ahead. Your line is open.

Gregory Peters: Afternoon, everyone. In your comments, Craig, you talked about retention across your specialty property casualty business. Can you give us a little more detail about how retention is moving across different lines of business?

Craig Smiddy: Sure, Gregory Peters. Be happy to. So we do look at our renewal retention metrics by line of business and by each one of our seventeen different subsidiary companies. And I can tell you that regardless of the line of business or the subsidiary, we are experiencing renewal retentions north of 85% pretty much across the board. And you know, we think that is attributable to our value proposition. Whereby, you know, we're not selling price. We're selling service. We're selling long-term commitment to these market segments. Selling our specialty expertise in underwriting, customer service, risk control, claims handling.

And so long and short of it is we think we have sticky renewal retention ratios given our, again, our value proposition and the kind of clients and distribution partners we work with that are focused on the long term and not those distribution partners that as we the so-called spreadsheeting of price and going with low price, that's not the type of customer that would go after. We and therefore as I say, across all lines of business, across all subsidiaries, very strong renewal retention ratios.

Gregory Peters: Yeah. The reason for the question is there's a lot of commentary on the other calls that have happened so far about competition pockets in certain areas, and one of the themes that has emerged in the first half of the series is increasing competition in the larger account business. And it's more property than probably where you play, but maybe you could segue and just talk a little bit about how your business at Old Republic Risk Management is turning, because I know that targets the larger account larger corporate market.

Craig Smiddy: Yeah. Thanks for that question, Gregory Peters. And I agree with your comments. I think, you know, one of the things that does differentiate us even on property for us, we had a slight uptick in our overall property rate increase this quarter. Because the property we're writing is not the large account catastrophic exposed types of property. You know, we're writing property that is often packaged along with the other lines of business and yes, some of our property has catastrophic exposure and we buy catastrophic reinsurance to protect us on that. But we're not a big rider of property cat where I think a lot of our peers have pretty decent-sized portfolios.

So we don't have that dynamic that others are experiencing and you know, overall, I think the competition that we're seeing elsewhere is nothing that I would say is a dramatic change from what we've seen earlier. Again, back to our value proposition and the kind of clients that we're seeking. You know, an example where perhaps we have seen competition and we pulled back a little bit as I've talked about last few quarters, public company D&O. In our subsidiary that does write a fair amount of that business, we've been pulling back and rate decreases on public D&O. We have looks like they're starting to flat now.

Still a little negative, but we've been encouraging our underwriters there to maintain rates. And if that means top line is down like it was last year on public D&O, that's perfectly fine. So you know, we're not immune to the competition, but I think there are some differences in our business model as well as the lines of business that we're in. And in risk management, just had a forty-year risk management client into our corporate headquarters here a couple of days ago. And had a nice conversation with them and, you know, on that business, as you know, Gregory Peters, we're serving it's all about service, and that's why that business is so sticky for us.

And that's why we have forty-year relationships with a lot of the big clients. They retain a lot of their risk themselves, so they're not looking to us for risk transfer. They're looking to us for service. And we have large deductibles or they have captives that we see most of the premium back to, and again, there too, that requires a relationship and long-term focus. There's a lot of collateral at stake there, and so when we collateralize we have those obligations collateralized by the client. Again, it has to be a relationship and we have very strong long-term relationships in our large account risk management business for sure.

And we continue to add new clients based on a lot of there's a lot of discussion, as you know, from attending RIMs or other events among the risk managers of large companies and we have a top-tier reputation.

Gregory Peters: Yeah. Thanks for that additional information. I guess, I'll just ask one other question. I'll pivot to the title business. You know, one of the things that's popped up in the second quarter was you know, the issue around what's happening with title insurance rates in Texas. And, you know, there's a rate decrease that's being implemented. And I'm just curious about how what your views on that are. Do you anticipate that's gonna spread to other states, or how does that impact your operations? And just give us a broader sense of how you see the market reacting to that.

Craig Smiddy: Carolyn, I'll start off. You and I, Pat, discussions about this and know, every state is very different. Texas is unique in promulgating specific rates and other states we file rates and Carolyn has, I know, been working closely with her team to look take a very careful look at our rates and make sure we have adequate rates in every state. And our assessment, I think, thus far Carolyn, you correct me if I if I'm wrong, but I think our assessment is such far so far is that the promulgated rate in Texas is still an adequate rate, but I'll let you talk more about that, Carolyn.

Carolyn Monroe: Yeah. Also, Gregory Peters, if I'm not mistaken, right now that rate decrease has not gone into effect because it's been challenged and the last I checked, the challenge was held up in the court in I think they're trying to come to maybe a more reasonable settlement than what was initially proposed. So that has not taken effect yet. But know, when they generally, in the promulgated states like Texas, New Mexico, and Florida, you know, they look at prior year history and kind of determine if it's an adequate rate. And we have a lot of input on determining that as well. Our state associations do.

So I would think whatever we come up with will be an adequate rate to still service the industry.

Gregory Peters: Okay. Thanks for the answer.

Operator: And ladies and gentlemen, once again, it is star one. If you have a question, we'll go next to Paul Newsome from Piper Sandler.

Paul Newsome: Good afternoon. Thanks for the call. One may need to revisit to capital management. With no stock repurchase the last quarter. It sounds like to date. You know, why not? And, you know, how do you think about your own capital position at the moment?

Craig Smiddy: Sure, Paul Newsome. I'll be happy to talk about that. So as Frank mentioned in his opening comments, as a reminder, we had a $2 special dividend that we just paid in the first quarter. And that was on top of the large amount of share repurchases that we've made last year and in the preceding few years. So we closely look at both tools, in our tool chest, special dividends as well as share repurchases. And we're also very mindful of where the market price is relative to our book value when we make share repurchase decisions.

So, you know, the higher the market price is to book, the less we're going to be excited about share repurchases and on the other hand, the lower the market price is to book the more excited we get about share repurchases. And then to manage capital, we're cognizant of ROE. You know, as I mentioned, in my opening comments. We're very thoughtful about capital management and while we think we carry probably more capital than some of our peers, we want to maintain a strong balance sheet and be prepared for the unforeseen and we want to continue to invest be able to invest in new opportunities.

So we're conservative in the amount of capital we carry, but we're also very cognizant of ROE and we don't want to carry too much capital and that was primarily what led us to the decision that on top of all the share repurchases, we also issued a special dividend in the first quarter because we were carrying far too much capital. So we'll use both tools and we'll look at both options and take into consideration what has the best benefit to shareholders and then we present that to our board with a recommendation from management and proceed accordingly.

Paul Newsome: Second question, maybe a little bit more commentary on the investment outlook. You know, obviously, in combination cash flow and new money yields. Where do you think the longer-term trend here or at least the end of the trend is for investment?

Craig Smiddy: Well, I'd be happy to start it off. And if you think Frank might have addressed it in our opening comments, but if you compare where our new money rates are coming in on our fixed income portfolio vis-a-vis our average yield on our portfolio that's getting pretty tight. So I think that there can't be a big expectation that's going to improve dramatically, incrementally maybe, there still might be a little room comparing those differences between new money and our existing yield, but no big dramatic. And, Frank, please feel free to correct me if you see it differently or you have anything to add.

Francis Sodaro: No. I would just say the biggest component now is as we've returned so much capital, our base is so much lower. From a yield perspective, that's right. It's tightening up. I would expect there to be improvements all things being equal, but no longer would I expect that ten to fifteen percent higher that we had somewhere along the mid-single digits is probably what I would say all things being equal.

Paul Newsome: Appreciate it. Nice to be able to put Craig in a hot seat.

Craig Smiddy: I appreciate that, Paul Newsome.

Operator: The next question will come from Evan Tindle, Byram Capital.

Evan Tindle: Hi. Thanks for taking my call. Hi. Hi, Evan. My question is on the specialty insurance segment. I mean, you guys have pretty consistently now been posting combined ratios, like, around ninety, ninety-one. And, obviously, you guys guide to ninety to ninety-five over the full cycle. And I'm just wondering, has anything like, given how consistently you've kind of outperformed or almost outperformed that range, can you talk about, like has anything fundamentally changed in terms of the mix of your business or how well you guys are executing that might allow you to kind of tighten or lower that range in terms of guidance on the combined ratio for the full cycle?

Or do you guys still expect that to go back up to ninety-five at some point?

Craig Smiddy: Right. Well, you know, let me first just say a comment that I made earlier about the complexion of our portfolio and the fact that we're not writing large catastrophic property business per se vis-a-vis our peers. Again, we have some of that exposure, but when you write a large amount of catastrophic property, you can post some pretty decent combined ratios in good quarters and then you post some fairly awful combined ratios in quarters where there is a catastrophic event. So I think our combined ratio, given our casualty-focused business, is going to be in that range of ninety to ninety-five.

We have written a little bit more property in short-tail businesses as you can tell in the supplement. You can see the growth rate in property has been a little bit stronger as we improve our footprint with our inland marine new specialty subsidiary, our new E&S specialty subsidiary, they're able to write property in conjunction with other coverages. And so we've grown it, but it's still not a huge area for us.

So given our predominantly casualty-focused business, given our conservative loss reserving approaches, that ninety to ninety-five is still a good target and one that, you know, if you were able to parse out the property catastrophic portions of our competitors' combined ratio and strip out the other drivers of lower combined ratio lines of business, I think, you know, that's a pretty respectable target. And difficult to achieve a much lower target on the lines we write, particularly given the proportions of our lines of business.

Evan Tindle: Okay. Great. Thank you. One other question. Obviously, there's been, you know, AI is the talk of the town in various industries. And I'm just curious how you guys are playing with or implementing AI at this point. If you think it can, you know, maybe meet underwriting process more efficiently or help you guys cut costs or otherwise impact your business over the next, you know, three to five years.

Craig Smiddy: Sure. I'd be happy to talk about that. So we are very much involved as an executive team here and with our subsidiary companies at exploring all of the AI tools that are available and ones that we might want to consider building ourselves. We just announced that we hired an AI leader at the corporate holding company level that can help lead our Steve Cross. He is leading our AI efforts and it's hard to talk about AI without talking about data analytics because you really need the data analytics to go hand in hand with the AI to put the AI to work for you.

And when we talk, as I commented in my opening comments, we're making investments in technology. We're making a concerted effort to retire our legacy IT debt. That's the first step. You've got to have in order to have data analytics, and then in order to in turn from there, leverage what's available in AI, you've got to have modern technology in place. So we are investing in technology. We're retiring our legacy technology debt. We're investing in data analytics here too.

A couple of years ago at the corporate level, we hired a data and analytics expert and that expert works with our John Giancilo works with our subsidiary companies on data analytics and we've built out that team so that we have those data and analytics available and then Steve Cross and his team can set on top of that what's available from the AI perspective. And we think of it as an executive team in two ways, either for the most part AI will help you make better decisions or it will help you be more efficient. So we have numerous AI projects we're exploring.

And one of the first categories is this an AI project that's going to help us with this efficiency or is this an AI project that's gonna help us with better decision making? And we have several pilots in place, several that are helping us right now with better decision making, better efficiencies, and we have numerous in the pipeline. And, again, we're building the data and analytics for that to sit on top of, and then the data and analytics sits on top of modern IT technology, which is what we're investing in.

Evan Tindle: Awesome. Thank you. And, actually, maybe one more if there's time. On the title insurance business, do you guys think do you think that you need to see mortgage rates fall before you start to see combined ratios getting back into the, you know, ninety-six, ninety-five, or below range? Do you think you can improve margins in the current kind of housing environment?

Craig Smiddy: I'll kick it off, Carolyn, and then let you add what you think. We are not satisfied with a combined ratio in title above ninety-five. We realize that in a tight market like we're in now with high interest rates, a very slow real estate market, that we're gonna be at the top end of that range. And Carolyn and I have had many discussions and we're working very hard to bring our combined ratio down assuming the same environment that exists today, we should be performing at a ninety-five combined ratio.

So there are things that we're doing to look at where we're spending money and I think an example of that is our decision to discontinue our focus on providing a closing platform because there's other partners and vendors that can provide very good closing platforms that our technology works well with. We don't need to be the ones providing the closing platform. So that's an example of, you know, we're looking to make sure we're being as efficient as possible. Our hope for this year was that we would get below that ninety-five mark. Carolyn still has and her team still have aspirations to bring that down.

We had the litigation expense we talked about earlier that drove up our combined ratio a couple of points this quarter. But last year we finished at ninety-seven. This year, you know, it could be in that range, but our aspiration is to get it below ninety-five. Carolyn, is there anything you would add to that?

Carolyn Monroe: No. Just that, you know, absent of any kind of an increase in the market, we just can continue to look inward to see what we could be doing at a more efficient level that will help us save money. We never stop doing that. But given the fact that, you know, we have to understand that this market we have right now might be what we have. So we just gotta figure out what we could be doing different. And so we're honestly looking at that every day. So we don't just depend on the market to get better. We depend on what we're doing as well.

Operator: And we'll take a follow-up from Gregory Peters from Raymond James.

Gregory Peters: Hey. Real quick. If we go to the supplement on page two, I wanted to just give us what's going on inside the small line home and auto warranty? That seems to be growing quite nicely. And then the other question I have is just on the new business initiative. Cyber, I think, is one of those initiatives. And not hearing great things about the pricing conditions in that market. So maybe you could talk about those two areas. Thank you.

Craig Smiddy: Sure, Gregory Peters. I'll be happy to talk about both of those. So on home and auto warranty, the majority of the growth that you see there is really all the growth that you see there is auto warranty. We have entered into several new relationships with key partners and we expect to continue to have the auto warranty business grow. The home warranty business is not growing as very dependent on the real estate cycle. Those that we write are typically sold in conjunction with a property purchase, a new home purchase. So, you know, the real estate market, interest rates, have not helped our home warranty subsidiary grow but, you know, that'll change just like in title.

We know things will turn at some point. But it's, you know, that's why we're diversified and even in home and auto warranty, that's why okay, let's the real estate market is tough right now. Let's focus on building some new relationships that can help us grow our auto warranty business. So that's what's going on there. You know, on the cyber front, one of our new subsidiaries is Cyber Indeed and I've met with that team and one of the things I said to them is given that you're a startup, the way that we handle startups is there's no incentive to put premiums on the books in the short term, you know.

We even variable compensation we will on a new startup, we'll just say, listen, that's gonna be fixed for three years because we know it's gonna take time to grow. Don't want you to grow too fast. We don't want you to grow into a market that's too competitive. Wanna give you time. We focus that we're our definition of success is ten years out, and when we look back, you know, how does it look? Not the first three years. So in cyber, everything we hear from that team is that rates have come down over the last couple of years, but there is, I think, clear consensus indication that rates are at least flattening out.

And, you know, I read this morning from others that there's indications of greater pricing discipline, greater underwriting discipline in the cyber arena. So the discussion we've had with our cyber team is listen. Focus on building out your team. We know you're gonna be in expense load for the next couple two to three years. Take your time. Build it right. Wait for the market to turn and for there for you to be certain that there's price adequacy in the marketplace, and then so, actually, the timing feels pretty good to us because if they wanted to write it, a lot of cyber today, they could. They're building it out.

We don't expect to write premiums until probably beginning of next year and even then we'll go slow. And but we'll be ready and there's no incentive for them to put any premiums on the book until the timing's right. And meantime, they're just focused on building out that operation and they have their sleeves rolled up and working day and night to get it built so that when the market is right, we'll be there for it.

Gregory Peters: Makes sense. Thanks for the answers.

Operator: Once again, ladies and gentlemen, that is At this time, there appear to be no further questions. I'd like to hand the call back to manager for any additional or closing remarks.

Craig Smiddy: Okay. Well, we appreciate all the questions and engagement. Sometimes our August conference call is a little slower given people are on vacation and enjoying summer. So we wish everyone the best. Enjoy the rest of your summer. And again, appreciate your interest in Old Republic International Corporation, and we'll be back next quarter to let you know how things are going. So and by the way, there's the siren in the background. It's Craig Peters' film. Still listening. So alright. Thank you very much.

Operator: Today. You may now disconnect.