Variations in claim ratios are typically caused by changes in the frequency and severity of claims incurred, changes in premium rates, and the level of premium refunds, and periodic changes in claim and claim expense reserve estimates resulting from ongoing reevaluations of reported and incurred but not reported claims and claim expenses. As demonstrated in the table on the previous page, theestimates. The Company can therefore experience period-to-period volatility in the underwriting results posted for individual coverages. In light of Old Republic's basic underwriting focus in managing its business, a long-term objective has been to dampen this volatility by diversifying coverages offered and industries served.

The claim ratios include loss adjustment expenses where appropriate. Policyholders' dividends, which apply principally to workers' compensation insurance, are typically a reflection of changes in loss experience from prior years for individual or groups of policies, rather than overallcurrent year results, and should be viewed in conjunction with claim ratio trends.

The Company generally underwrites concurrently workers' compensation, commercial automobile (liability and physical damage), and general liability insurance coverages for a large number of customers. Given this concurrent underwriting approach, an evaluation of trends in premiums, claim and dividend ratios for these individual coverages is more appropriately considered for the aggregate of these coverages. As the table above indicates, claim ratios have been on a fairly consistent downtrend during the past five years. The improvement has arisen from slightly lower estimates of current accident years' claim provisions, and in 2021 and 2020, by the lessening impacts from developmentsdevelopment of prior years' reserve estimates. Favorable development was higher in 2021 due predominantly to better than expected claims experience related to workers' compensation and commercial automobile reserves on older, more developed years.

Claims are a major cost factor and changes in them reflect continually evolving pricing and risk selection together with variability in loss severity and frequency trends caused by fortuitous and other events.trends. Changes in commercial automobile claim ratios are primarily due to fluctuations in claim severity. Claim ratios for workers' compensation and liability insurance can reflect greater variability due to chance events in any one year, changes in loss costs emanating from participation in involuntary markets (i.e. insurance assigned risk pools and associations in which participation is basically mandatory), and estimated provisions for loss costs not recoverable from assuming reinsurers which may experience financial difficulties from time to time. Additionally, workers' compensation claim costs in particular are affected by a variety of underwriting techniques such as the use of captive reinsurance retentions, retrospective premium plans, and self-insured or deductible insurance programs that are intended to mitigate claim costs over time. Claim ratios for a relatively small book of general liability coverages tend to be highly volatile year to year due to the impact of changes in claim emergence and severity of legacy asbestosasbestosis and environmental claims exposures.

The Company's property and liability insurance subsidiaries establish claim reserves which consist of estimates to settle: a) reported claims; b) claims which have been incurred as of each balance sheet date but have not as yet been reported ("IBNR") to the insurance subsidiaries; and c) the direct costs (fees and costs which are allocable to individual

The establishment of claim reserves by the Company's insurance subsidiaries is a reasonably complex and dynamic process influenced by a large variety of factors. These factors principally include past experience applicable to the anticipated costs of various types of claims, continually evolving and changing legal theories emanating from the judicial system, recurring accounting, statistical, and actuarial studies, the professional experience and expertise of the Company's claim departments' personnel or attorneys and independent claim adjusters, ongoing changes in claim frequency or severity patterns such as those caused by natural disasters, illnesses, accidents, work-related injuries, and changes in general and industry-specific economic conditions. Consequently, the reserves established are a reflection of the opinions of a large number of persons, of the application and interpretation of historical precedent and trends, of expectations as to future developments, and of management's judgment in interpreting all such factors. At any point in time, the Company is exposed to the incurrencepossibility of possibly higher or lower than anticipated claim costs due to all of these factors, and to the evolution, interpretation, and expansion of tort law, as well as the effects of unexpected jury verdicts.

Over the Company only uses such discountedyears, the subject of property and liability insurance claim reserves in evaluatinghas been written about and analyzed extensively by a large number of professionals and regulators. Accordingly, the results of its operations, in pricing its products and settling retrospective and reinsured accounts, in evaluating policy terms and experience, and for other general business purposes. Solely to comply with reporting rules mandated by the Securities and Exchange Commission, however, Old Republic has made statistical studies of applicable workers' compensation reserves to obtain estimatesabove discussion should be regarded as a basic outline of the amounts by whichsubject and not as a definitive presentation. Management believes that its overall reserving practices have been consistently applied over many years, and that its aggregate net reserves have generally resulted in reasonable approximations of the ultimate net costs of claims incurred. However, no representation is made nor is any guaranty given that ultimate net claim and claim adjustment expense reserves, net of reinsurance, have been discounted. These studies have resultedrelated costs will not develop in estimates of such amounts at $209.6 million, $216.5 million and $240.7 million, as of December 31, 2019, 2018 and 2017, respectively. It shouldfuture years to be noted, however, that these differences between discounted and non-discounted (terminal) reserves are fundamentally of an informational nature, and are not indicative of an effect on operating results for anysignificantly greater or lower than currently established reserve estimates.

Early in 2001, the Federal Department of Labor revised the Federal Black Lung Program regulations. The revisions basically require a reevaluation of previously settled, denied, or new occupational disease claims in the context of newly devised, more lenient standards when such claims are resubmitted. Following a number of challenges and appeals by the insurance and coal mining industries, the revised regulations were, for the most part, upheld in June, 2002 and are to be applied prospectively. Since the final quarter of 2001, black lung claims filed or refiled pursuant to these revised regulations have increased, though the volume of new claim reports has abated in recent years.

In March 2010, federal regulations were revised once again as part of the Patient Protection and Affordability Act that reinstatesAct. These revisions reinstitute two provisions that can potentially benefit claimants. In response to this most recent legislation and the above noted 2001 change, black lung claims filed or refiled have risen once again. The vast majority of claims filed to date against Old Republic pertain to business underwritten through loss sensitive programs that permit the charge of additional or refund of return premiums to wholly or partially offset changes in estimated claim costs, or to business underwritten as a service carrier on behalf of various industry-wide involuntary market (i.e. assigned risk) pools. A much smaller portion pertains to business produced on a traditional risk transfer basis. The Company has established applicable reserves for claims as they have been reported

Old Republic's reserve estimates also include provisions for indemnity and settlement costs for various asbestosis and environmental impairment ("A&E")&E claims that have been filed in the normal course of business against a number of its insurance subsidiaries. Many such claims relate to policies incepting prior to 1985, including many issued during a short period between 1981 and 1982 pursuant to an agency agreement canceled in 1982. Over the years, the Company's property and liability insurance subsidiaries have typically issued general liability insurance policies with face amounts ranging between $1.0$1.0 million and $2.0$2.0 million and rarely exceeding $10.0$10.0 million. Such policies have, in turn, been subject to reinsurance cessions which have typically reduced the subsidiaries' net retentions to $.5 million$500 thousand or less as to each claim.

Old Republic's exposure to A&E claims cannot, however, be calculated by conventional insurance reserving methods for a variety of reasons, including: a) the absence of statistically valid data inasmuch as such claims typicallygenerally involve long reporting delays and very often uncertainty as to the number and identity of insureds against whom such claims have arisen or will arise; and b) the litigation history of such or similar claims for insurance industry members which has produced inconsistentclaims. Inconsistent court decisions with regard tostem from such questions as toas: when an alleged loss occurred, which policies provide coverage, how a loss is to be allocated among potentially responsible insureds and/or their insurance carriers, how policy coverage exclusions are to be interpreted, what types of environmental impairment or toxic tort claims are covered, when the insurer's duty to defend is triggered, how policy limits are to be calculated, and whether clean-up costs constitute property damage.

In order to maintain premium production within its capacity and limit maximum losses for which it might become liable under its policies, Old Republic, as is the common practice in the insurance industry, may cede all or a portion of its premiums and related liabilities on certain classes of insurance, individual policies, or blocks of business to other insurers and reinsurers. Although the ceding of insurance does not ordinarily discharge an insurer from its direct liability to a policyholder, it is industry practice to establish the reinsured part of risks as the liability of the reinsurer. Old Republic also employs retrospective premium and a large variety of risk-sharing procedures and arrangements for parts of its business in order to reduce underwriting losses for which it might become liable under insurance policies it issues, and to afford its customers or producers a degree of participation in the risks and rewards associated with such business. Under retrospective arrangements, Old Republic collects additional premiums if losses are greater than originally anticipated and refunds a portion of original premiums if loss costs are lower. Pursuant to risk sharing arrangements, the Company adjusts production costs or premiums retroactively to likewise reflect deviations from originally expected loss costs. The amount of premium, production costs and other retrospective adjustments which may be made is either limited or unlimited depending on the Company's evaluation of risks and related contractual arrangements.

Corporate & Other operations include the accounts of a small life and accident insurance operations are not material.

Historically, several types of joint venture or risk sharing relationship. The Company may, in exchange for a ceding commission, reinsure up to 100% of the underwriting risk, and the premium applicable to such risk, to insurers owned by or affiliated with lending institutions, financial and other intermediaries, and commercial institutions generally whose customers are insuredinsurance coverages underwritten by Old Republic have been affected in varying degrees by changes in national economic conditions. During periods when housing activity or individual customers who have formed captive insurance companies. The ceding commissions received compensatemortgage lending are constrained by any combination of rising interest rates, tighter mortgage underwriting guidelines, falling home prices, excess housing supply and/or economic recession, operating and/or claim costs pertaining to such coverages tend to rise disproportionately to revenues and can result in underwriting losses and reduced levels of profitability.

At least one Old Republic General Insurance subsidiary is licensed to do business in each of the 50 states, the District of Columbia, Puerto Rico, Virgin Islands, Guam, and each of the Canadian provinces. Title Insurance subsidiaries are licensed to do business in 50 states, the District of Columbia and Guam. Although not currently writing new business, the RFIG Run-off subsidiaries are licensed in 50 states and the District of Columbia. Consolidated direct premium volume distributed among the various geographical regions shown was as follows for performing the direct insurer's functions of underwriting, actuarial, claim settlement, loss control, legal, reinsurance,past three years:

The Company's mortgage guaranty insurance carriers ceased underwriting new policies and the existing book of business was placed in run-off operating mode effective August 31, 2011. Prior to that event. Nevertheless, the possibility continues to exist that non-reinsured losses could, dependingdate, traditional primary mortgage insurance was marketed principally through a direct sales force which called on a wide rangemortgage bankers, brokers, commercial banks, savings institutions and other mortgage originators. No sales commissions or other forms of severity and frequency assumptions, aggregate several hundred million dollars to an insurer such as the Company. Such aggregation of losses could occur in the event of a catastrophe such as an earthquake that could leadremuneration were paid to the deathlending institutions or injuryothers for the procurement or development of a large number of persons concentrated in a single facility such as a high rise building.

The Company believes its experience and expertise have enabled it to develop a variety of specialized insurance programs and related services for its customers, and to secure state insurance departments' approval of these programs.

The Company is subject to U.S. federal and state laws and regulations that require financial institutions, insurance companies and other businesses to protect the security and confidentiality of personal information, and to provide notice of their practices relating to the collection and disclosure of personal information. State insurance privacy laws and regulations, enacted to implement the privacy requirements of the federal Gramm-Leach-Bliley Act of 1999, impose restrictions on the Company’s ability to collect and share consumer personal information, and require notices and disclosures to consumers.

The Company is also subject to laws and regulations requiring notification to affected individuals and regulatorsregulatory agencies of security breaches.

Effective March 1, 2017,Privacy and cybersecurity laws and regulations in the New York DepartmentU.S. are evolving and subject to continual change.

As with many elements of the Company’s business, the first and primary level of human capital management occurs in the Company’s operating subsidiaries. This approach reflects the different needs and expectations of each operating subsidiary based on the industry specialization, lines of business, and geographical location of each subsidiary. In addition, the flexibility of this approach to implementhuman capital management benefits the entire enterprise and leads to the identification of methods and solutions that can eventually be applied across the entire business.

The importance of Old Republic’s human capital to the Company’s success was never more clearly demonstrated than during the COVID-19 pandemic. In this challenging environment, Old Republic associates continued to serve customers and operate the Company’s businesses with no meaningful interruption in service. This level of performance was the result of both their dedication and loyalty to the business, as well as the investments made by the Company in information technology, systems. The regulation imposes specific safeguards as well as governance, risk assessment, monitoringemployee training and testing, third party service provider incident response and reporting and other requirements.working arrangements sufficiently flexible for conditions.

The COVID-19 pandemic continued to adversely impact the U.S. economy and financial markets. New variants of the COVID-19 virus or a resurgence in infection rates could lead to a reduction in economic activity, resulting in a decline in demand for the Company’s products. The pandemic could also have a materially adverse effectmore significant impact on Old Republic’s claims experience in future periods, resulting in a decrease in profitability.

Actions taken in response to the pandemic by federal, state and local government authorities, including state insurance departments, could, individually or in the aggregate, adversely affect Old Republic’s business. In addition, a resurgence in infection rates could impact the financial markets and adversely impact the value of Old Republic's investment portfolio and its investment income.

Moreover, for long-tail coverages, which generally include workers' compensation, commercial automobile (mostly trucking) liability, general liability, errors and omissions and directors’ and officers' liability, as well as title insurance, significant periods of time often elapse between the occurrence of an insured loss, the reporting of the loss to the Company and its business segments are subjectthe payment of that loss. The length of time required to ultimately settle long-tailed claims and the costs associated with resolving these claims, coupled with uncertain and sometimes variable judicial rulings on coverage and policy allocation issues along with the possibility of legislative actions, makes reserving for these exposures highly uncertain and creates a varietyrisk of possibly adverse developments in both known and as-yet-unknown claims.

As a result of these uncertainties, the ultimate paid loss and loss adjustment expense may deviate, perhaps substantially, from the point-in-time estimates of such risk factorslosses and within individual segments, each typeexpenses, as reflected in the loss reserves included in the Company’s financial statements. For example, for the years ended December 31, 2021, 2020 and 2019, the Company experienced consolidated favorable development of reserves for losses and loss adjustment expenses incurred in prior years of $210.6 million, $83.8 million and $30.9 million, respectively, which had a positive effect on

In general, the premiums for the Company’s insurance coveragepolicies are established at the time a policy is issued and, therefore, before all of the underlying liabilities and costs associated with the policy are known. Like other insurance companies, Old Republic relies on estimates and assumptions in setting premium rates. Establishing adequate premiums is necessary to generate sufficient revenue to offset losses, loss adjustment expenses and other underwriting costs and to earn an underwriting profit. If the Company does not accurately assess and underwrite the risks that it assumes, it may be exposednot charge adequate premiums to risk factors specificcover its losses and expenses, which would adversely affect the Company’s financial condition and results of operations. Alternatively, the Company could set its premiums too high, which could reduce its competitiveness and lead to them. The following sections set forth management's evaluationlower revenues.

Pricing involves the acquisition and analysis of material riskhistorical loss data, and the projection of future trends, loss costs and expenses, and inflation trends, among other factors, for each of the Company asCompany’s products. In order to accurately price its policies, the Company:

The Company seeks to implement its pricing accurately in accordance with its assumptions, data available to it and its analysis of that data. Given the uncertainties generally inherent in estimates and assumptions, the Company’s ability to undertake these efforts successfully and, as a result, accurately price its policies, is not free from risk.

Investment income is an insurance holding company with no operationsimportant component of the Company’s net income and one of its own. Substantially allprimary sources of its assets consistcash flow to support operations. As of those used forDecember 31, 2021, the business conducted by its insurance subsidiaries. It relies upon dividends from such subsidiaries in orderconsolidated investment portfolio reflected an allocation of approximately 68% to payfixed-maturity (bonds and notes) and short-term investments, and 32% to equity securities (common stocks). For the interestyears ended December 31, 2021, 2020 and principal on its debt obligations, dividends to its shareholders, and corporate expenses. The extent to which the insurance subsidiaries are able to declare and pay dividends is subject to regulations under the laws of their states or foreign jurisdictions of domicile. The regulations limit dividends based on the amount of statutory adjusted unassigned surplus or statutory earnings, and require the insurance subsidiaries to maintain minimum amounts of capital, surplus and reserves. Dividends in excess of the ordinary limitations can only be declared and paid with prior regulatory approval, of which there can be no assurance. The inability of the insurance subsidiaries to pay dividends in an amount sufficient to meet the Company's debt service and cash dividends on stock, as well as other cash requirements could result in liquidity issues.

The Company’s investment portfolio consists primarily of highly rated debt securities and large capitalization common stocks. Its investments are subject to market-wide risks and fluctuations, as well as to risks inherent in particular securities. Changing or unprecedented market conditions, such as experienced in the first half of 2020 as a result of the COVID-19 pandemic, could decrease liquidity and materially impact the future valuation of securities in its investment portfolio. This could cause the Company to impair the carrying value of some portion of those debtfixed maturity and equity securities in the future. Volatility or illiquidity in the markets in which the Company holds positions may cause certain other-than-temporary impairments within its portfolio and thus lead to potentially significant adverse effects on the Company’s liquidity, financial condition and operating results.investment portfolio.

Income from the Company’s investment portfolio is one of its primary sources of cash flow to support operations and claim payments. Should the Company improperly structureIn structuring its investment portfolio, the Company seeks to meet those future liabilitiesalign its policyholder obligations and the maturity of its fixed maturity portfolio. As a result of either an unexpected increase in policyholder obligations (e.g., because of an underestimate in reserves) or should ita short fall in funds available (e.g., because of a default in a fixed maturity investment), the Company could have unexpected losses, including losses resulting fromdifficulty in meeting its obligations. In this case, the Company could be forced liquidation ofto liquidate its investments before their maturity or under adverse securities marketsmarket conditions to obtain the Company could be unablefunds necessary to meet thoseits obligations. The Company’s investments and investment policies are subject to the provisions of state insurance laws, which resultsThis could result in its portfolio being predominantly limited to highly rated fixed income securities. Interest rates on fixed income securities have been at historical lows. In the event that interest rates should rise above those of the Company’s fixed income securities, the market value of the Company’s investment portfolio would decline. Any significant decreaseunexpected losses in the value ofportfolio. Additionally, the Company’s investment portfolio could adversely impact its GAAP financial condition, but not necessarily the statutory financial

The competitive positions of insurance companies in general have come to depend increasingly on independent ratings of their financial strengthCompany has credit risk with counterparties associated with investments, premiums receivable and claims-paying ability.reinsurance recoverables. The rating agencies base their ratings on criteria they establish regarding an insurer's financial strength, operating performance, strategic position and ability to meet its obligations to policyholders. A significant downgrade in the ratings of any of the Company's major policy-issuing subsidiaries could have a materially adverse effect on their ability to compete for new business and retain existing business and, as a result, their operating results and financial condition.

The Company has established processes and procedures designedis also exposed to identify, measure, analyze, monitor and reportcredit risk with its reinsurers. Reinsurance does not discharge the typesCompany’s insurance subsidiaries of risktheir obligations under their insurance policies. The Company’s insurance subsidiaries remain liable to policyholders even if they are unable to make recoveries that they believe they are entitled to receive under their reinsurance contracts. With respect to long-tail coverages, the creditworthiness of the Company’s reinsurers may change before it can recover amounts to which it is entitled. If a reinsurer is unable to meet any of its obligations to the Company, it would be responsible for all claims and claim settlement expenses for which it would have otherwise received payment from the reinsurer. If the Company is unable to collect amounts recoverable from reinsurers, its business, financial condition and results of operations would be adversely affected.

The payment of dividends by the Company’s insurance subsidiaries is restricted by state insurance laws or subject to approval of the insurance regulatory authorities in the jurisdictions in which they are domiciled. These authorities recognize only statutory accounting practices for determining financial position, results of operations and the ability of an insurer to pay dividends to its shareholders. The specific rules governing the payment of dividends by the Company’s insurance subsidiaries vary from jurisdiction to jurisdiction. The Company’s insurance subsidiaries are domiciled in many different jurisdictions. Generally, the insurance subsidiaries are prohibited from paying dividends to the holding company in excess of either the greater or lesser of (depending upon the state involved) 10% of statutory surplus or a portion of statutory net income, without the prior approval of the applicable insurance regulatory authority. Dividends declared during the fiscal years ended December 31, 2021, 2020 and 2019 to the holding company by its subsidiaries amounted to $566.7 million, $472.4 million and $399.5 million, respectively. There can be no assurance that the Company’s subsidiaries will be able to continue to pay such dividends to the Company in the future. If the Company’s subsidiaries are unable to pay dividends to the holding company in amounts necessary to satisfy existing obligations, the Company’s ability to service its debt and pay dividends to its shareholders would be adversely affected.