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Old Republic's (ORI) Solid Segmental Results Aid Amid Cost Woes
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Old Republic International (ORI - Free Report) is poised to grow on solid market presence, niche focus, low property catastrophe exposure in its General Insurance segment and a strong capital position. Earnings of this insurer grew 10.3% in the last five years, better than the industry average of 9%.
Return on invested capital in the trailing 12 months was 6%, better than the industry average of 1.9%, reflecting RDN’s efficiency in utilizing funds to generate income. It boasts a unique combination of Specialty Property and Casualty and Title franchises, which offers diversification.
ORI’s General Insurance segment should continue to benefit from segmentation, better risk selection, meticulous pricing and increased use of analytics. This, in turn, has helped deliver a combined ratio below 96 for 14 years. ORI aims combined ratio between 90 and 95.
The Title business, on the other hand, should continue to benefit from an expanding presence in the commercial real estate market.
However, ORI’s net margin has been declining over the last couple of years. Though expenses have lowered, the margin contraction is owing to declining revenues. The insurer must strive to improve its revenues, or else margins will continue to erode.
ORI’s debt level has increased significantly over the last few years, and so has its interest expense. In fact, times interest earned has been declining over the same time frame. The insurer must service its debt uninterruptedly, or else creditworthiness could be dented.
Nonetheless, banking on operational strength, this third-largest title insurer in the country distributes wealth to its shareholders in the form of dividends and share repurchases. ORI has an impressive dividend history banking on operational excellence. It has increased dividends for 43 straight years. It has been paying dividends for the last 83 years, besides paying special dividends occasionally, making it an attractive pick for yield-seeking investors. Its board recently approved a $1.1 billion share buyback program.
Old Republic International is one of the 111 companies that have posted at least 28 consecutive years of annual dividend growth. The insurer has returned 12.6% per share for the last 10 years to shareholders.
Other Insurance Industry Players
Other players from the insurance industry include Palomar Holdings, Inc. (PLMR - Free Report) , Axis Capital Holdings Limited (AXS - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) .
Palomar has a decent history of delivering earnings surprises in each of the last four quarters, the average being 11.12%.
New business, strong premium retention rates for existing business and renewal of existing policies, better pricing and effective capital deployment continue to drive Palomar. Continued operational excellence helps it maintain a strong capital position.
Axis Capital has a decent history of delivering earnings surprises in each of the last four quarters, the average being 102.57%.
AXS’ insurance business should benefit from a diversified portfolio of global specialty businesses, leadership positions and growth opportunities across major business lines. The Reinsurance business should benefit from strong cycle management that focuses on improving the business mix. Axis Capital’s solid capital position, aided by operational expertise, supports effective capital deployment.
Cincinnati Financial has a decent history of delivering earnings surprises in each of the last four quarters, the average being 43.05%.
Prudent pricing, an agent-centric model, a higher level of insured exposures and disciplined expansion of Cincinnati Re should continue to drive Cincinnati Financial’s premiums. CINF boasts above-average industry premium growth.
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Old Republic's (ORI) Solid Segmental Results Aid Amid Cost Woes
Old Republic International (ORI - Free Report) is poised to grow on solid market presence, niche focus, low property catastrophe exposure in its General Insurance segment and a strong capital position. Earnings of this insurer grew 10.3% in the last five years, better than the industry average of 9%.
Return on invested capital in the trailing 12 months was 6%, better than the industry average of 1.9%, reflecting RDN’s efficiency in utilizing funds to generate income. It boasts a unique combination of Specialty Property and Casualty and Title franchises, which offers diversification.
ORI’s General Insurance segment should continue to benefit from segmentation, better risk selection, meticulous pricing and increased use of analytics. This, in turn, has helped deliver a combined ratio below 96 for 14 years. ORI aims combined ratio between 90 and 95.
The Title business, on the other hand, should continue to benefit from an expanding presence in the commercial real estate market.
However, ORI’s net margin has been declining over the last couple of years. Though expenses have lowered, the margin contraction is owing to declining revenues. The insurer must strive to improve its revenues, or else margins will continue to erode.
ORI’s debt level has increased significantly over the last few years, and so has its interest expense. In fact, times interest earned has been declining over the same time frame. The insurer must service its debt uninterruptedly, or else creditworthiness could be dented.
Nonetheless, banking on operational strength, this third-largest title insurer in the country distributes wealth to its shareholders in the form of dividends and share repurchases. ORI has an impressive dividend history banking on operational excellence. It has increased dividends for 43 straight years. It has been paying dividends for the last 83 years, besides paying special dividends occasionally, making it an attractive pick for yield-seeking investors. Its board recently approved a $1.1 billion share buyback program.
Old Republic International is one of the 111 companies that have posted at least 28 consecutive years of annual dividend growth. The insurer has returned 12.6% per share for the last 10 years to shareholders.
Other Insurance Industry Players
Other players from the insurance industry include Palomar Holdings, Inc. (PLMR - Free Report) , Axis Capital Holdings Limited (AXS - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) .
Palomar has a decent history of delivering earnings surprises in each of the last four quarters, the average being 11.12%.
New business, strong premium retention rates for existing business and renewal of existing policies, better pricing and effective capital deployment continue to drive Palomar. Continued operational excellence helps it maintain a strong capital position.
Axis Capital has a decent history of delivering earnings surprises in each of the last four quarters, the average being 102.57%.
AXS’ insurance business should benefit from a diversified portfolio of global specialty businesses, leadership positions and growth opportunities across major business lines. The Reinsurance business should benefit from strong cycle management that focuses on improving the business mix. Axis Capital’s solid capital position, aided by operational expertise, supports effective capital deployment.
Cincinnati Financial has a decent history of delivering earnings surprises in each of the last four quarters, the average being 43.05%.
Prudent pricing, an agent-centric model, a higher level of insured exposures and disciplined expansion of Cincinnati Re should continue to drive Cincinnati Financial’s premiums. CINF boasts above-average industry premium growth.