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Old Republic Stock Rallies 32.9% in a Year: More Room for Growth?

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Old Republic International Corporation’s (ORI - Free Report) shares have rallied 32.9% over the past year compared with the industry's growth of 28.7%. The Finance sector and the Zacks S&P 500 composite have returned 29.3% and 25.3%, respectively, in the same time frame. With a market capitalization of $9.24 billion, the average volume of shares traded in the last three months was 1.21 million.

ORI Outperforms Industry, Sector, S&P 500

Zacks Investment Research
Image Source: Zacks Investment Research

The rally was largely driven by solid market presence, high renewal retention ratios, new business production in its General Insurance segment, favorable growth estimates and effective capital deployment.

This multi-line insurer, carrying a Zacks Rank #2 (Buy) at present, surpassed earnings estimates in three of the last four quarters and missed in one, the average being 9.06%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ORI’s Growth Projection Encourages

The Zacks Consensus Estimate for Old Republic’s 2024 earnings per share indicates a year-over-year increase of 7.6%. The consensus estimate for revenues is pegged at $7.99 billion, implying a year-over-year improvement of 7.2%. The consensus estimate for 2025 earnings per share and revenues indicates an increase of 4.4% and 5.6%, respectively, from the corresponding 2024 estimates. Earnings have grown 10.3% in the past five years, better than the industry average of 9%.

Optimistic Analyst Sentiment on ORI

Each of the two analysts covering the stock has raised estimates for 2024, and one of the two analysts has raised the same for 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 4.4% and 3.5% north in the last 60 days.

ORI’s Return on Invested Capital

Its return on invested capital (ROIC) has increased every year. This reflects ORI’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 6.1%, higher than the industry average of 2.5%.

Factors Acting in Favor of Old Republic

Old Republic is poised to grow on solid market presence, niche focus, low property catastrophe exposure in its General Insurance segment and a strong capital position.

ORI’s General Insurance segment should continue to benefit from the combination of premium rate increases, high renewal retention ratios and new business production, including contributions from recently established insurance underwriting subsidiaries. Commercial auto, general liability and property should continue to achieve strong rate increases. 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.

ORI’s Impressive Dividend History

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. In the first half of 2024, ORI returned a total capital of approximately $744 million. Following the close of the quarter and through Aug. 1, 2024, the insurer repurchased additional shares of $94 million, leaving nearly $479 million remaining under the most recent authorization approved by the board in March 2024.

Old Republic 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

ORI Shares are Affordable

The stock is undervalued compared with its industry. It is currently trading at a price-to-book multiple of 1.53, lower than the industry average of 2.66. The insurer has an impressive Value Score of B. Back-tested results show that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best opportunities in the value investing space.

Shares of other multi-line insurers like MGIC Investment Corporation (MTG - Free Report) , Assurant, Inc. (AIZ - Free Report) and Enact Holdings, Inc. (ACT - Free Report) are also trading at a discount to the industry average.


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