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RegistrationNo. 333-168130
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Old Republic | PMA | |
Old Republic International Corporation 307 North Michigan Avenue Chicago, Illinois 60601 Attention: Investor Relations Telephone:(312) 346-8100 | PMA Capital Corporation 380 Sentry Parkway Blue Bell, Pennsylvania 19422 Attention: Investor Relations Telephone: (610) 397-5298 |
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PMA CAPITAL CORPORATION
• | to adopt the Agreement and Plan of Merger, dated as of June 9, 2010, by and among Old Republic International Corporation (“Old Republic”), OR New Corp., a wholly owned subsidiary of Old Republic (“Merger Sub”), and PMA, pursuant to which Merger Sub will be merged with and into PMA and PMA will continue as the surviving entity, as further described in the accompanying proxy statement/prospectus; and | |
• | to transact any other business that may properly be brought before the special meeting, or any adjournments or postponements thereof, including, without limitation, a motion to adjourn or postpone the special meeting to another timeand/or place for the purpose of soliciting additional proxies in favor of the proposal to adopt the merger agreement, if necessary. |
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Q: | When and where is the PMA special meeting? | |
A: | The PMA special meeting will take place on Tuesday, September 21, 2010 at 10:00 a.m. local time, at Philadelphia Marriott West, 111 Crawford Avenue, West Conshohocken, Pennsylvania. | |
Q: | Why am I receiving this document? | |
A: | Old Republic has agreed to acquire PMA pursuant to the terms of a merger agreement that is described in this proxy statement/prospectus. A copy of the merger agreement is attached to this proxy statement/prospectus asAnnex A. | |
In order to complete the merger, PMA shareholders must vote to adopt the merger agreement. PMA is holding a special meeting of shareholders to obtain this shareholder approval. | ||
This proxy statement/prospectus contains important information about the merger and the special meeting of the shareholders of PMA, and you should read it carefully. The enclosed voting materials allow you to vote your shares without attending the special meeting in person. |
Your vote is extremely important. We encourage you to vote as soon as possible. For more information on how to vote your shares, please see the section titled “PMA Special Meeting” beginning on page 183. |
Q: | What shareholder vote is required to adopt the merger agreement and approve the other items to be voted on at the PMA special meeting? | |
A: | Merger Agreement. Under Pennsylvania law, which governs PMA, the merger agreement must be adopted by the affirmative vote of a majority of the votes cast by all shareholders entitled to vote on the merger, assuming a quorum is present. Each share of PMA class A common stock is entitled to one vote on the adoption of the merger agreement. | |
If these votes are not obtained, the merger will not be completed. Your vote is very important. You are encouraged to submit a proxy as soon as possible. | ||
Adjournment of meeting. The affirmative vote of a majority of the shares of PMA class A common stock entitled to vote and present, in person or represented by proxy, at the special meeting is required to adjourn or postpone the special meeting for solicitation of additional proxies in the event there are not sufficient votes present, in person or represented by proxy, at the time of the special meeting to adopt the merger agreement. | ||
Q: | What will happen in the merger? | |
A: | In the merger, OR New Corp. (“Merger Sub”), a wholly owned subsidiary of Old Republic, will merge with and into PMA. Following the merger, PMA will continue as the surviving entity and as a wholly owned subsidiary of Old Republic. | |
Q: | What will PMA shareholders receive in the merger? How does the collar work? | |
A: | Upon the completion of the merger, each outstanding share of PMA class A common stock, excluding any shares owned by PMA or Old Republic or any subsidiary of PMA or Old Republic (other than PMA class A common stock held in trust accounts and the like for the benefit of a third party or in respect of an outstanding debt), will be converted into the right to receive 0.55 shares of Old Republic common stock (the “exchange ratio”), provided that the volume weighted average price per share of Old Republic common stock on the NYSE, as reported by Bloomberg LP, for the twenty consecutive trading days ending on and including the fifth trading day prior to, but not including, the effective date of the merger, is at least $12.50 but not greater than $17.00 (the “Old Republic measurement price”). The range from $12.50 to $17.00 is referred to as the “collar.” | |
The exchange ratio will change if the Old Republic measurement price is outside of the collar. If the Old Republic measurement price is less than $12.50, the exchange ratio will be determined by dividing $6.875 by the Old Republic measurement price, subject to a maximum exchange ratio of 0.60 shares. If the Old Republic measurement price is greater than $17.00, the exchange ratio will be determined by dividing $9.350 by the Old |
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Republic measurement price, subject to a minimum exchange ratio of 0.50 shares. See “The Merger Agreement — Terms of the Merger” below for additional information. | ||
Q: | Are PMA shareholders able to exercise appraisal rights? | |
A: | No. PMA shareholders are not entitled to appraisal rights under the Pennsylvania Business Corporation Law (“PBCL”) in connection with the merger. | |
Q: | When do the parties expect to complete the merger? | |
A: | Old Republic and PMA are working to complete the merger as quickly as practicable. We currently expect the merger to be completed near the end of the third quarter of 2010. However, neither Old Republic nor PMA can predict the effective time of the merger because it is subject to conditions both within and beyond each company’s control. | |
Q: | How will the combined company be managed? | |
A: | The current senior management team of Old Republic, including Aldo C. Zucaro, who is currently serving as the chairman of the board of directors and chief executive officer of Old Republic, will continue in their respective positions and manage the combined company. | |
Q: | What will be the composition of the board of directors of Old Republic following the merger? | |
A: | The Old Republic board will remain the same following the merger, except that one of the independent directors of PMA will join Old Republic’s board of directors as a Class 2 director. | |
Q: | Why is my vote important? | |
A: | If you do not submit a proxy or vote in person at the special meeting, it will be more difficult for PMA to obtain the necessary quorum to hold the meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the special meeting. | |
Q: | What constitutes a quorum for the meeting? | |
A: | A majority of the outstanding shares of PMA class A common stock having voting power being present, in person or represented by proxy constitutes a quorum for the meeting. | |
Q: | Does PMA’s board of directors recommend adoption of the merger agreement and approval of the other matters to be voted on at the PMA special meeting? | |
A: | Yes. The PMA board of directors has determined that the terms of the merger agreement and the transactions contemplated thereby are advisable, fair to, and in the best interests of, PMA and PMA’s shareholders, and recommends that shareholders vote “FOR” the proposal to adopt the merger agreement. In addition, the PMA board of directors recommends that shareholders vote “FOR” the approval of a proposal to adjourn or postpone the special meeting for solicitation of additional proxies in the event there are not sufficient votes present, in person or represented by proxy, at the time of the special meeting to adopt the merger agreement. | |
Please see “The Merger — PMA’s Reasons for the Merger” and “The Merger — Old Republic’s Reasons for the Merger” below for additional information. | ||
Q: | What is the record date for the special meeting? | |
A: | The record date for the PMA special meeting is July 30, 2010 (the “PMA record date”). Holders of PMA class A common stock on the PMA record date are entitled to notice of the PMA special meeting and to vote at the PMA special meeting or any adjournment or postponement thereof. | |
Q: | Who can vote at the special meeting? | |
A: | All PMA shareholders of record as of the close of business on July 30, 2010, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. |
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Q: | What do I need to do now? | |
A: | The parties urge you to read carefully this proxy statement/prospectus, including its annexes and the documents incorporated by reference herein. You also may want to review the documents referenced under the section “Where You Can Find More Information” below and consult with your accounting, legal and tax advisors. | |
Once you have reviewed this information, please respond by completing, signing and dating your proxy card and returning it in the enclosed postage-paid envelope or, if available, by submitting your proxy by telephone or through the Internet as soon as possible so that your shares of PMA class A common stock will be represented and voted at the special meeting, as applicable. | ||
Please refer to your proxy card or the information forwarded by your broker or other nominee to see which voting options are available to you. | ||
The Internet and telephone proxy submission procedures are designed to verify your stock holdings and to allow you to confirm that your instructions have been properly recorded. | ||
The method by which you submit a proxy will in no way limit your right to vote at the special meeting if you later decide to attend the meeting in person. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the special meeting. | ||
Q: | Who may attend the meeting? | |
A: | PMA shareholders (or their authorized representatives) and PMA’s invited guests may attend the meeting. Verification of stock ownership will be required at the meeting. If you own your shares in your own name or hold them through a broker (and can provide documentation showing ownership such as a letter from your broker or a recent account statement) at the close of business on the record date (July 30, 2010), you will be permitted to attend the meeting. | |
Q: | How do I obtain directions to attend the special meeting in person? | |
A: | You may contact PMA Investor Relations at(610) 397-5298 to obtain directions to the special meeting. | |
Q: | What if I abstain from voting or do not vote? | |
A: | Abstentions of shares of PMA class A common stock will be counted as shares that are present and entitled to vote for purposes of determining whether a quorum exists for a vote on any particular proposal, but will not be counted as votes cast in regard to a particular proposal. If a holder of shares of PMA class A common stock fails to return its proxy card, such shares will not be counted for purposes of such vote. | |
Q: | If my PMA class A common stock is held in a brokerage account or in “street name,” will my broker vote my shares for me? | |
A: | If you are a PMA shareholder and if you do not provide your bank or broker with instructions on how to vote your street name shares, your bank or broker will not be permitted to vote them unless your bank or broker already has discretionary authority to vote such street name shares. Also, if your bank or broker has indicated on the proxy that it does not have discretionary authority to vote such street name shares, your bank or broker will not be permitted to vote them. Either of these situations results in a “broker non-vote.” | |
Q: | How are broker non-votes treated? | |
A: | Broker non-votes will have no effect on the proposals to adopt the merger agreement and approve the adjournment or postponement of the PMA special meeting once a quorum for the meeting has been established. Therefore, you should provide your bank or broker with instructions on how to vote your shares, or arrange to attend the PMA special meeting and vote your shares in person to avoid a broker non-vote. | |
Q: | What should I do if I receive more than one set of voting materials for the special meeting? | |
A: | You may receive more than one set of voting materials for the special meeting, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your |
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shares of PMA class A common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of PMA class A common stock. If you are a holder of record and your shares of PMA class A common stock are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive. | ||
Q: | What do I do if I want to change my vote or revoke my proxy? |
A: | If you are a registered shareholder, you may change your vote at any time before the vote takes place at the PMA special meeting. To do so, you may either complete and submit a new proxy card with a later date or send a written notice to the corporate secretary of PMA stating that you would like to revoke your proxy. In addition, you may elect to attend the PMA special meeting and vote in person, as described above. However, if you are not a registered shareholder, but instead hold your shares of PMA class A common stock through a bank, broker or other nominee, you may revoke your instructions only by informing the bank, broker or nominee in accordance with any procedures established by such nominee. |
Q: | How will my shares be represented at the meeting? | |
A: | At the meeting, the officers named in your proxy card will vote your shares in the manner you requested if you correctly submitted your proxy. If you sign your proxy card and return it without indicating how you would like to vote your shares, your proxy will be voted as the PMA board of directors recommends, which is: | |
• “FOR” the adoption of the merger agreement; and | ||
• “FOR” the approval of a proposal to adjourn or postpone the special meeting for solicitation of additional proxies in the event there are not sufficient votes present, in person or represented by proxy, at the time of the special meeting to adopt the merger agreement. | ||
Q: | What effect will the merger have on options to purchase PMA class A common stock and other stock-based awards that have been granted to employees and directors of PMA? | |
A: | The terms of outstanding restricted share award agreements between PMA and its non-employee directors provide that the vesting of all unvested restricted shares will accelerate upon a change in control transaction. The merger will constitute a change in control transaction. | |
Restricted shares and options to purchase PMA class A common stock will be converted into restricted shares and options to purchase Old Republic common stock based on the exchange ratio. Stock appreciation rights based on the value of PMA class A common stock will be converted into stock appreciation rights with respect to Old Republic common stock based on the exchange ratio. The conversion price for the options and the stock appreciation rights of Old Republic will be established by dividing the current exercise price by the exchange ratio. The converted stock options, stock appreciation rights and restricted shares, other than restricted shares held by non-employee directors, which will vest upon the closing of the merger, will otherwise have the same terms and conditions as were in effect before the merger was effective. | ||
At the effective time of the merger, the performance goals designated under each of PMA’s 2009 and 2010 Officer Long Term Incentive Plans will be deemed to have been met at 100% of target and the performance goals designated under PMA’s 2010 Officer Annual Incentive Compensation Plan will be deemed to have been met at a payout factor of 100%. As such, the payment of such awards will be based on the satisfaction by participants of only the service-based and time-based vesting requirements designated under such plans. Restricted share units are outstanding under PMA’s 2009 and 2010 Officer Long Term Incentive Plans. At the effective time of the merger, each outstanding restricted share unit awarded under a long-term incentive plan will be automatically converted into a number of restricted share units of Old Republic based on the exchange ratio and the proportion of the performance period under the applicable long term incentive plan that has passed at the time of the closing of the merger. At the effective time of the merger, PMA’s 2008 Officer Long Term Incentive Plan will be terminated. | ||
See “The Merger Agreement — Treatment of PMA Equity Compensation Awards and Performance-Based Compensation Awards.” |
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Q: | Should I send in my PMA stock certificates now? | |
A: | No. If the merger is completed, written instructions will be sent to shareholders of PMA with respect to the exchange of their share certificates for the merger consideration described in the merger agreement. | |
Q: | Do I have to take any action now to exchange my shares held in book-entry form? | |
A: | No. PMA shareholders who hold their shares in book-entry form will receive instructions for the exchange of their shares for the merger consideration following the completion of the merger. | |
Q. | Are there risks associated with the merger, and what will happen to PMA if the merger is not completed, that I should consider in deciding how to vote? | |
A. | Yes. There are a number of risks related to the merger and the other transactions contemplated by the merger agreement that are discussed in this proxy statement/prospectus and in other documents incorporated by reference or referred to in this proxy statement/prospectus. Please read with particular care the detailed description of the risks described in “Risk Factors — Risks Relating to the Pending Merger” below. Additional risks relating to Old Republic’s and PMA’s business are described under the heading “Risk Factors” below and in the Old Republic SEC filings and the PMA SEC filings referred to in “Where You Can Find More Information” below. | |
If the merger is not completed, PMA’s shareholders will not receive the merger consideration and PMA will remain a stand alone public company with its class A common stock traded on the Nasdaq Stock Market. Under certain circumstances, PMA may be required to reimburse Old Republic for its expenses or pay Old Republic a fee in connection with the termination of the merger agreement. | ||
In addition, if the merger is not completed, PMA’s ability to reach a resolution with the Pennsylvania Insurance Department with respect to the Department’s examination of PMA’s insurance subsidiaries as of December 31, 2007 will be adversely impacted. See “The Merger — PMA’s Reasons for the Merger — Resolution of Pennsylvania Insurance Department Examination.” Based on recent discussions with representatives of the Department, in order to resolve the outstanding issues as a stand alone organization, PMA will need to engage in administrative and legal review processes which, irrespective of their ultimate outcome, will likely hinder the long-term andday-to-day continuity of PMA’s business operations and, in the interim, potentially have a negative impact on the financial ratings of its insurance subsidiaries. PMA cannot predict how long the processes would take or whether it would ultimately be successful. In the event that PMA is unsuccessful in its administrative and legal appeals, PMA could be required to take actions, such as increasing its loss and loss adjustment expense reserves, that would materially and adversely affect its business, financial condition and results of operations. | ||
Q: | Will a proxy solicitor be used? | |
A: | Yes. PMA has engaged MacKenzie Partners, Inc. to assist in the solicitation of proxies for the special meeting and PMA expects it will pay MacKenzie Partners, Inc. a fee of approximately $10,000. PMA has also agreed to reimburse MacKenzie Partners, Inc. for reasonableout-of-pocket expenses incurred in connection with the proxy solicitation and to indemnify MacKenzie Partners, Inc. against certain losses, costs and expenses. In addition, our officers and employees may solicit proxies by telephone or in person, but no additional compensation will be paid to them. | |
Q: | Who can I contact with any additional questions? | |
A: | If you have additional questions about the merger, you should contact Old Republic or PMA at: |
Old Republic International Corporation 307 North Michigan Avenue Chicago, Illinois 60601 Attention: Investor Relations Telephone:(312) 346-8100 | PMA Capital Corporation 380 Sentry Parkway Blue Bell, PA 19422 Attention: Investor Relations Telephone: (610) 397-5298 |
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If you would like additional copies of this proxy statement/prospectus, or if you need assistance voting your shares, you should contact: | ||
MacKenzie Partners, Inc. 105 Madison Avenue New York, NY 10016 (800) 322-2885 (toll free) or (212) 929-5500 (call collect) PMA@mackenziepartners.com | ||
Q: | Where can I find more information about the companies? | |
A: | You can find more information about Old Republic and PMA in the documents described under the section entitled “Where You Can Find More Information” below. |
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• | the challenges PMA would face continuing as an independent company, | |
• | the opportunity to resolve issues relating to the Pennsylvania Insurance Department’s examination of PMA’s loss and loss adjustment expense reserves through a merger with Old Republic rather than engaging in administrative and legal review processes which, irrespective of their ultimate outcome, would likely hinder the long-term andday-to-day continuity of PMA’s business operations and, in the interim, potentially have a negative impact on its financial ratings, |
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• | the fact that the merger consideration represented a premium of approximately 15% to the closing price of PMA’s class A common stock on June 8, 2010, the last trading day prior to execution of the merger agreement, | |
• | the opinion of BofA Merrill Lynch, dated June 9, 2010, to PMA’s board of directors to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its opinion, the exchange ratio provided for in the merger was fair, from a financial point of view, to holders of PMA class A common stock (see the section entitled “The Merger — Opinion of PMA’s Financial Advisor” for a more complete description), |
• | given the lengthy and thorough sale process undertaken by PMA and its financial advisor, the probability of receiving an offer better than the offer made by Old Republic was low, |
• | the benefits of the merger to PMA’s shareholders, clients, employees and other stakeholders compared to alternative strategies where PMA continued to operate independently, | |
• | the terms of the merger agreement, | |
• | the decentralized nature of Old Republic’s operations, which is expected to provide PMA with the ability to maintain its operations in substantially the manner they existed prior to the merger, | |
• | based on the size of the transaction, the terms of the merger agreement and discussions with the Pennsylvania Insurance Department, PMA believes there is a high likelihood that the transaction will be completed, | |
• | Old Republic has higher financial strength ratings than PMA, with Old Republic’s principal property and casualty insurance subsidiaries having A.M. Best ratings of “A+” compared to PMA’s A.M. Best rating of “A−,” and | |
• | that the merger is expected to qualify as a tax-free “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, which will permit PMA shareholders to defer recognition of taxes associated with their shares of PMA class A common stock (other than cash paid in lieu of fractional shares) until they decide to sell the shares of Old Republic common stock received in the merger. |
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• | adoption by PMA shareholders of the merger agreement; | |
• | shares of Old Republic common stock issuable to the shareholders of PMA pursuant to the merger will have been approved for listing on the NYSE, subject to official notice of issuance; | |
• | absence of any order, decree or injunction issued, and of any action taken by any court or agency or other law preventing or making illegal the consummation of the merger; | |
• | receipt of all required regulatory approvals; and | |
• | receipt of voluntary written terminations of employment or severance agreements with the Chief Executive Officer of PMA and six of the eight other PMA officers party to such agreements effective prior to the merger. |
• | the merger shall not have been consummated on or before December 31, 2010, unless the party seeking to terminate the merger agreement failed to perform or observe the applicable covenants and agreements under the merger agreement; |
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• | a required regulatory approval has been denied or any governmental entity has taken action permanently enjoining or otherwise prohibiting or making illegal the merger, including with respect to antitrust matters, if HSR approval has not been obtained within 120 days of the filing of the HSR application (such 120 day period to be extended for another 120 days if HSR approval is a reasonable possibility); | |
• | the other party has breached a representation, warranty, covenant or agreement that would preclude the satisfaction of certain conditions to the consummation of the merger and such breach is not remedied within the applicable cure period; | |
• | the PMA board of directors shall have (i) failed to recommend the approval and adoption of the merger agreement to the PMA shareholders, (ii) made any PMA change of recommendation, (iii) approved or recommended, or publicly proposed to approve or recommend, any alternative proposal or (iv) failed to recommend to PMA’s shareholders that they reject any tender offer or exchange offer that constitutes an alternative transaction within the ten business day period specified inRule 14e-2(a) of the Exchange Act; or | |
• | the PMA shareholders have not adopted the merger agreement at the PMA special meeting. See “The Merger Agreement — Termination of the Merger Agreement.” |
• | to adopt the merger agreement; and | |
• | to approve the adjournment or postponement of the PMA special meeting for the solicitation of additional proxies in the event there are not sufficient votes present, in person or represented by proxy, at the time of the special meeting to adopt the merger agreement. |
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Quarters Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2010 | 2009 | Change | 2010 | 2009 | Change | |||||||||||||||||||
Operating Revenues | $ | 935.3 | $ | 912.2 | 2.5 | % | $ | 1,864.9 | $ | 1,790.7 | 4.1 | % | ||||||||||||
Net Operating Income (Loss) | 10.0 | (49.6 | ) | 120.3 | 33.2 | (103.5 | ) | 132.1 | ||||||||||||||||
Net Income (Loss) | $ | 57.4 | $ | (15.8 | ) | 461.4 | % | $ | 82.5 | $ | (69.8 | ) | 218.2 | % | ||||||||||
Diluted Earnings Per Share: | ||||||||||||||||||||||||
Net Operating Income (Loss) | $ | 0.05 | $ | (0.21 | ) | 123.8 | % | $ | 0.16 | $ | (0.44 | ) | 136.4 | % | ||||||||||
Net Income (Loss) | $ | 0.23 | $ | (0.07 | ) | 428.6 | % | $ | 0.35 | $ | (0.30 | ) | 216.7 | % | ||||||||||
Cash Dividends Per Share: | $ | 0.1725 | $ | 0.1700 | 1.5 | % | $ | 0.3450 | $ | 0.3400 | 1.5 | % | ||||||||||||
Ending Book Value Per Share: | $ | 16.84 | $ | 15.93 | 5.7 | % | ||||||||||||||||||
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Quarters Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2010 | 2009 | Change | 2010 | 2009 | Change | |||||||||||||||||||
Operating revenues: | ||||||||||||||||||||||||
General insurance | $ | 468.3 | $ | 507.0 | (7.6 | )% | $ | 947.5 | $ | 1,030.8 | (8.1 | )% | ||||||||||||
Mortgage guaranty | 152.1 | 166.5 | (8.7 | ) | 312.6 | 337.8 | (7.5 | ) | ||||||||||||||||
Title insurance | 293.5 | 219.0 | 34.0 | 555.6 | 379.3 | 46.5 | ||||||||||||||||||
Corporate and other | 21.3 | 19.5 | 9.1 | 49.1 | 42.7 | 14.9 | ||||||||||||||||||
Total | $ | 935.3 | $ | 912.2 | 2.5 | % | $ | 1,864.9 | $ | 1,790.7 | 4.1 | % | ||||||||||||
Pretax operating income (loss): | ||||||||||||||||||||||||
General insurance | $ | 29.3 | $ | 46.4 | (36.8 | )% | $ | 98.6 | $ | 104.6 | (5.8 | )% | ||||||||||||
Mortgage guaranty | (22.1 | ) | (137.9 | ) | 83.9 | (56.3 | ) | (282.5 | ) | 80.1 | ||||||||||||||
Title insurance | 4.0 | 5.6 | (28.2 | ) | (4.6 | ) | (3.4 | ) | (34.5 | ) | ||||||||||||||
Corporate and other | (3.2 | ) | (0.1 | ) | N/M | (1.4 | ) | 2.4 | (157.0 | ) | ||||||||||||||
Sub-total | 7.9 | (86.0 | ) | 109.2 | 36.2 | (178.8 | ) | 120.3 | ||||||||||||||||
Realized investment gains (losses): | ||||||||||||||||||||||||
From sales | 72.8 | 0.3 | 75.8 | 0.3 | ||||||||||||||||||||
From impairments | — | — | — | — | ||||||||||||||||||||
Net realized investment gains (losses) | 72.8 | 0.3 | N/M | 75.8 | 0.3 | N/M | ||||||||||||||||||
Consolidated pretax income (loss) | 80.8 | (85.6 | ) | 194.3 | 112.1 | (178.4 | ) | 162.8 | ||||||||||||||||
Income taxes (credits) | 23.3 | (69.8 | ) | 133.5 | 29.5 | (108.6 | ) | 127.2 | ||||||||||||||||
Net income (loss) | $ | 57.4 | $ | (15.8 | ) | 461.4 | % | $ | 82.5 | $ | (69.8 | ) | 218.2 | % | ||||||||||
Consolidated underwriting ratio: | ||||||||||||||||||||||||
Benefits and claim ratio | 60.4 | % | 78.8 | % | 60.0 | % | 81.3 | % | ||||||||||||||||
Expense ratio | 48.8 | 42.3 | 48.1 | 41.0 | ||||||||||||||||||||
Composite ratio | 109.2 | % | 121.1 | % | 108.1 | % | 122.3 | % | ||||||||||||||||
Components of diluted earnings per share: | ||||||||||||||||||||||||
Net operating income (loss) | $ | 0.05 | $ | (0.21 | ) | 123.8 | % | $ | 0.16 | $ | (0.44 | ) | 136.4 | % | ||||||||||
Net realized investment gains (losses) | 0.18 | 0.14 | 0.19 | 0.14 | ||||||||||||||||||||
Net income (loss) | $ | 0.23 | $ | (0.07 | ) | 428.6 | % | $ | 0.35 | $ | (0.30 | ) | 216.7 | % | ||||||||||
Cash dividends paid per share | $ | 0.1725 | $ | 0.1700 | 1.5 | % | $ | 0.3450 | $ | 0.3400 | 1.5 | % | ||||||||||||
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Quarters Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Realized gains (losses) from sales applicable to previously impaired securities: | ||||||||||||||||
Actual tax basis (loss) on sales | $ | (44.0 | ) | $ | — | $ | (44.0 | ) | $ | — | ||||||
GAAP valuation impact of the original impairment charge on securities sold | 71.9 | — | 71.9 | — | ||||||||||||
Net total | 27.9 | — | 27.9 | — | ||||||||||||
Net realized gains from sales of all other securities | 44.9 | 0.3 | 47.9 | 0.3 | ||||||||||||
Net realized gains from all securities sales | $ | 72.8 | $ | 0.3 | $ | 75.8 | $ | 0.3 | ||||||||
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• | the retention of mortgage loans on an uninsured basis in the lender’s portfolio of assets; | |
• | capital markets utilizing alternative credit enhancements. |
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• | employees may experience uncertainty regarding their future roles with the combined company, which might adversely affect PMA’sand/or Old Republic’s ability to retain, recruit and motivate key personnel; | |
• | the attention of PMAand/or Old Republic management may be directed toward the completion of the merger and transaction-related considerations and may be diverted from theday-to-day business operations of their respective companies, and matters related to the merger may require commitments of time and resources that could otherwise have been devoted to other opportunities that might have been beneficial to Old Republic or PMA; and | |
• | third parties with business relationships with Old Republic or PMA may seek to terminateand/or renegotiate their relationships with Old Republic or PMA as a result of the merger, whether pursuant to the terms of their existing agreements with PMAand/or Old Republic or otherwise. |
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• | having to pay certain significant costs relating to the merger without receiving the benefits of the merger; | |
• | the attention of management of Old Republic and PMA will have been diverted to the merger instead of on each company’s own operations and pursuit of other opportunities that could have been beneficial to that company; and | |
• | resulting negative customer perception could adversely affect the ability of Old Republic and PMA to compete for, or to win, new and renewal business in the marketplace. |
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• | a greater number of shares outstanding; | |
• | different shareholders; | |
• | different businesses, including with respect to the types of business written, geographical areas of operation and underwriting guidelines; and | |
• | different assets, including investment portfolios, and capitalizations. |
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• | the ability of Old Republic’s board of directors to issue and set the terms of preferred stock without the approval of Old Republic’s shareholders; | |
• | the ability of Old Republic’s board of directors to adopt, amend or repeal Old Republic’s by-laws; | |
• | the staggered nature of Old Republic’s board of directors; | |
• | the potential restrictions on the ability of a 10% holder of Old Republic common stock to complete a business combination with Old Republic; | |
• | the application of Section 203 of the General Corporation Law of the State of Delaware (“DGCL”) to Old Republic, which may limit the ability of an interested shareholder to engage in a business combination with Old Republic; and | |
• | restrictions on the rights of shareholders to submit proposals to be considered at shareholders’ meetings. |
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Q1 2010 | Q1 2009 | FY 2009 | FY 2008 | FY 2007 | FY 2006 | FY 2005 | ||||||||||||||||||||||
(Dollar amounts in thousands, except per share data)(1) | ||||||||||||||||||||||||||||
Gross Premiums Written | $ | 171,905 | $ | 164,070 | $ | 561,266 | $ | 528,915 | $ | 524,172 | $ | 455,756 | $ | 420,787 | ||||||||||||||
Net Premiums Written | $ | 128,245 | $ | 117,978 | $ | 401,905 | $ | 414,237 | $ | 394,698 | $ | 373,001 | $ | 374,975 | ||||||||||||||
Consolidated Revenues: | ||||||||||||||||||||||||||||
Net premiums earned | $ | 103,496 | $ | 104,930 | $ | 414,771 | $ | 390,217 | $ | 378,243 | $ | 367,403 | $ | 357,824 | ||||||||||||||
Claims service revenues and commission income | 20,975 | 19,147 | 78,471 | 69,754 | 37,039 | 27,853 | 23,591 | |||||||||||||||||||||
Net investment income | 9,120 | 8,457 | 36,876 | 36,069 | 39,592 | 35,851 | 32,235 | |||||||||||||||||||||
Net realized investment gains (losses) | 426 | 749 | 514 | (4,724 | ) | 563 | 1,239 | 372 | ||||||||||||||||||||
Other revenues | 392 | 176 | 1,083 | 2,841 | 340 | 244 | 406 | |||||||||||||||||||||
Total consolidated revenues | $ | 134,409 | $ | 133,459 | $ | 531,715 | $ | 494,157 | $ | 455,777 | $ | 432,590 | $ | 414,428 | ||||||||||||||
Components of net income (loss)(2): | ||||||||||||||||||||||||||||
Pre-tax operating income (loss): | ||||||||||||||||||||||||||||
The PMA Insurance Group(3) | $ | 14,267 | $ | 15,187 | $ | 43,050 | $ | 46,713 | $ | 38,045 | $ | 26,082 | $ | 19,511 | ||||||||||||||
Fee-based Business(3) | 2,305 | 2,013 | 7,208 | 7,205 | 3,724 | 2,802 | 2,509 | |||||||||||||||||||||
Corporate and Other | (4,366 | ) | (5,000 | ) | (19,127 | ) | (20,651 | ) | (19,564 | ) | (21,580 | ) | (24,598 | ) | ||||||||||||||
Pre-tax operating income (loss) | 12,206 | 12,200 | 31,131 | 33,267 | 22,205 | 7,304 | (2,578 | ) | ||||||||||||||||||||
Income tax expense (benefit) | 4,389 | 4,384 | (9,357 | )(4) | 11,730 | 7,822 | 2,783 | 2,559 | ||||||||||||||||||||
Operating income (loss) | 7,817 | 7,816 | 40,488 | 21,537 | 14,383 | 4,521 | (5,137 | ) | ||||||||||||||||||||
Net realized investment gains (losses) after tax | 277 | 487 | 334 | (3,071 | ) | 366 | 805 | 242 | ||||||||||||||||||||
Income (loss) from continuing operations | 8,094 | 8,303 | 40,822 | 18,466 | 14,749 | 5,326 | (4,895 | ) | ||||||||||||||||||||
Loss from discontinued operations, net of tax | — | (86 | ) | (19,609 | ) | (12,777 | ) | (57,277 | ) | (1,275 | ) | (16,125 | ) | |||||||||||||||
Net income (loss) | $ | 8,094 | $ | 8,217 | $ | 21,213 | $ | 5,689 | $ | (42,528 | ) | $ | 4,051 | $ | (21,020 | ) | ||||||||||||
Per Share Data: | ||||||||||||||||||||||||||||
Weighted average shares: | ||||||||||||||||||||||||||||
Basic | 32,199,378 | 31,956,183 | 32,133,970 | 31,820,173 | 32,169,287 | 32,238,278 | 31,682,648 | |||||||||||||||||||||
Diluted | 32,260,938 | 32,020,346 | 32,186,402 | 32,038,781 | 32,578,025 | 32,731,360 | 31,682,648 | |||||||||||||||||||||
Income (loss) per share: | ||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||
Continuing Operations | $ | 0.25 | $ | 0.26 | $ | 1.27 | $ | 0.58 | $ | 0.46 | $ | 0.17 | $ | (0.15 | ) | |||||||||||||
Discontinued Operations | — | — | (0.61 | ) | (0.40 | ) | (1.78 | ) | (0.04 | ) | (0.51 | ) | ||||||||||||||||
$ | 0.25 | $ | 0.26 | $ | 0.66 | $ | 0.18 | $ | (1.32 | ) | $ | 0.13 | $ | (0.66 | ) | |||||||||||||
Diluted: | ||||||||||||||||||||||||||||
Continuing Operations | $ | 0.25 | $ | 0.26 | $ | 1.27 | $ | 0.58 | $ | 0.45 | $ | 0.16 | $ | (0.15 | ) | |||||||||||||
Discontinued Operations | — | — | (0.61 | ) | (0.40 | ) | (1.76 | ) | (0.04 | ) | (0.51 | ) | ||||||||||||||||
$ | 0.25 | $ | 0.26 | $ | 0.66 | $ | 0.18 | $ | (1.31 | ) | $ | 0.12 | $ | (0.66 | ) | |||||||||||||
Shareholders’ equity per share | $ | 12.96 | $ | 10.91 | $ | 12.46 | $ | 10.78 | $ | 11.92 | $ | 12.83 | $ | 12.70 | ||||||||||||||
Consolidated Financial Position: | ||||||||||||||||||||||||||||
Total investments | $ | 857,738 | $ | 786,307 | $ | 862,653 | $ | 772,241 | $ | 815,331 | $ | 786,344 | $ | 763,197 | ||||||||||||||
Total assets from continuing operations | 2,409,711 | 2,317,778 | 2,362,739 | 2,259,053 | 2,205,985 | 1,991,709 | 1,955,085 | |||||||||||||||||||||
Total assets | 2,409,711 | 2,553,043 | 2,362,739 | 2,502,716 | 2,581,641 | 2,666,407 | 2,888,045 | |||||||||||||||||||||
Unpaid losses and LAE | 1,274,006 | 1,256,435 | 1,269,685 | 1,242,258 | 1,212,956 | 1,152,704 | 1,169,338 | |||||||||||||||||||||
Debt | 137,445 | 129,380 | 143,380 | 129,380 | 131,262 | 131,211 | 196,181 | |||||||||||||||||||||
Shareholders’ equity | 418,130 | 351,270 | 401,797 | 344,656 | 378,584 | 419,093 | 406,223 |
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(1) | Unless specifically identified, amounts exclude discontinued operations. | |
(2) | Operating income (loss), which PMA defines as GAAP net income (loss) excluding net realized investment gains (losses) and results from discontinued operations, is the financial performance measure used by PMA’s management and Board of Directors to evaluate and assess the results of PMA’s businesses. Net realized investment activity is excluded because (i) net realized investment gains and losses are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains and losses that do not relate to the operations of the individual segments. Accordingly, PMA reports pre-tax operating income (loss) by segment in Note 16 of PMA’s Consolidated Financial Statements included in PMA’s annual report onForm 10-K incorporated into this proxy statement/prospectus by reference. Operating income (loss) does not replace net income (loss) as the GAAP measure of PMA’s consolidated results of operations. | |
(3) | As a result of PMA’s acquisition of Midlands Management Corporation (“Midlands”) in 2007, the combined operating results of PMA Management Corp. and Midlands have been reported in a new reporting segment, Fee-based Business. The results of PMA Management Corp. were previously included with the results of The PMA Insurance Group. For comparative purposes, the financial results of The PMA Insurance Group and PMA Management Corp. have been reclassified in all prior periods to reflect this change. The combined operating results for Fee-based Business also include those of PMA Management Corp. of New England, Inc., which PMA acquired in June 2008. | |
(4) | In 2009, PMA reduced the valuation allowance on PMA’s deferred tax assets by $20.0 million, which resulted in an income tax benefit. |
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INFORMATION OF OLD REPUBLIC
• | The accompanying notes to the pro forma financial statements; | |
• | Old Republic’s and PMA’s separate unaudited historical consolidated financial statements as of and for the three months ended March 31, 2010 included in their respective March 31, 2010 Reports onForm 10-Q; and | |
• | Old Republic’s and PMA’s separate audited historical consolidated financial statements as of and for the year ended December 31, 2009 included in their respective 2009 Reports onForm 10-K. |
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At March 31, 2010 | ||||||||||||||||||
Historical | Historical | Pro Forma | Pro Forma | |||||||||||||||
Old Republic | PMA | Adjustments | Notes | Old Republic | ||||||||||||||
($ in millions) | ||||||||||||||||||
ASSETS | ||||||||||||||||||
Investments: | ||||||||||||||||||
Fixed maturity securities, at fair value | $ | 8,352.2 | $ | 800.6 | $ | $ | 9,152.8 | |||||||||||
Equity securities, at fair value | 631.4 | — | 631.4 | |||||||||||||||
Short-term investments, at fair value | 783.5 | 25.9 | 809.4 | |||||||||||||||
Other investments | 31.2 | 31.2 | 64.4 | |||||||||||||||
Total investments | 9,798.5 | 857.7 | — | 10,656.2 | ||||||||||||||
Other Assets: | ||||||||||||||||||
Cash | 74.9 | 13.6 | (6.0 | ) | 2(k) | 82.5 | ||||||||||||
Accrued investment income | 112.5 | 7.7 | 120.2 | |||||||||||||||
Accounts and notes receivable | 794.4 | 275.1 | 1,069.5 | |||||||||||||||
Federal income tax recoverable: | ||||||||||||||||||
Current | 0.4 | — | 0.4 | |||||||||||||||
Deferred | — | 131.0 | (121.8 | ) | 2(d) | 9.2 | ||||||||||||
Prepaid federal income taxes | 136.0 | — | 136.0 | |||||||||||||||
Reinsurance balances and funds held | 130.7 | 61.6 | 192.3 | |||||||||||||||
Reinsurance recoverable | 2,595.8 | 880.1 | 3,475.9 | |||||||||||||||
Deferred policy acquisition costs | 202.0 | 44.8 | (44.8 | ) | 2(b)(i),2(e) | 202.0 | ||||||||||||
Goodwill and intangible assets | 169.0 | 29.6 | (29.6 | ) | 2(c) | 169.0 | ||||||||||||
Sundry assets | 226.2 | 108.5 | 334.7 | |||||||||||||||
Total Assets | $ | 14,240.9 | $ | 2,409.7 | $ | (202.2 | ) | $ | 16,448.4 | |||||||||
LIABILITIES, AND COMMON SHAREHOLDERS’ EQUITY | ||||||||||||||||||
Liabilities: | ||||||||||||||||||
Losses, claims, and settlement expenses | $ | 7,774.8 | $ | 1,274.0 | $ | $ | 9,048.8 | |||||||||||
Unearned premiums | 1,041.7 | 270.1 | (44.8 | ) | 2(e) | 1,267.0 | ||||||||||||
Other policyholders’ benefits and funds | 185.8 | 5.9 | 191.7 | |||||||||||||||
Total policy liabilities and accruals | 9,002.3 | 1,550.0 | (44.8 | ) | 10,507.5 | |||||||||||||
Commissions, expenses, fees, taxes, and other | 456.6 | 238.5 | 695.1 | |||||||||||||||
Reinsurance balances and funds | 335.8 | 65.7 | 401.5 | |||||||||||||||
Federal income tax payable: | ||||||||||||||||||
Deferred | 102.8 | — | (102.8 | ) | 2(d) | — | ||||||||||||
Debt | 347.2 | 137.4 | 484.6 | |||||||||||||||
Total Liabilities | 10,245.0 | 1,991.6 | (147.6 | ) | 12,089.0 | |||||||||||||
Common Shareholders’ Equity: | ||||||||||||||||||
Common stock | 241.0 | 171.1 | (153.3 | ) | 2(j),2(l) | 258.8 | ||||||||||||
Additional paid-in capital | 416.2 | 111.9 | 99.5 | 2(j),2(l) | 627.6 | |||||||||||||
Retained earnings | 2,911.8 | 163.8 | (29.5 | ) | 2(i),2(k),2(l) | 3,046.1 | ||||||||||||
Accumulated other comprehensive income (loss) | 468.3 | (5.9 | ) | 5.9 | 2(l) | 468.3 | ||||||||||||
Unallocated ESSOP shares (at cost) | (41.5 | ) | — | (41.5 | ) | |||||||||||||
Treasury stock (at cost) | — | (22.8 | ) | 22.8 | 2(l) | — | ||||||||||||
Total Common Shareholders’ Equity | 3,995.8 | 418.1 | (54.6 | ) | 4,359.3 | |||||||||||||
Total Liabilities, and Common Shareholders’ Equity | $ | 14,240.9 | $ | 2,409.7 | $ | (202.2 | ) | $ | 16,448.4 | |||||||||
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For the Three Months Ended March 31, 2010 | ||||||||||||||||||||
Historical | Historical | Pro Forma | Pro Forma | |||||||||||||||||
Old Republic | PMA | Adjustments | Notes | Old Republic | ||||||||||||||||
($ in millions, except share data) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Net premiums earned | $ | 752.3 | $ | 103.5 | $ | $ | 855.8 | |||||||||||||
Title, escrow, and other fees | 76.1 | — | 76.1 | |||||||||||||||||
Total premiums and fees | 828.5 | 103.5 | — | 932.0 | ||||||||||||||||
Net investment income | 96.2 | 9.1 | 105.3 | |||||||||||||||||
Other income | 4.8 | 21.4 | 26.2 | |||||||||||||||||
Total operating revenues | 929.6 | 134.0 | — | 1,063.6 | ||||||||||||||||
Realized investment gains | 2.9 | 0.4 | 3.3 | |||||||||||||||||
Total revenues | 932.6 | 134.4 | — | 1,067.0 | ||||||||||||||||
Benefits, Claims and Expenses: | ||||||||||||||||||||
Benefits, claims and settlement expenses | 491.6 | 75.1 | 566.7 | |||||||||||||||||
Dividends to policyholders | 2.5 | 0.5 | 3.0 | |||||||||||||||||
Underwriting, acquisition, and other expenses | 400.6 | 43.7 | 444.3 | |||||||||||||||||
Interest and other charges | 6.5 | 2.5 | 9.0 | |||||||||||||||||
Total expenses | 901.3 | 121.8 | — | 1,023.1 | ||||||||||||||||
Income before income taxes (credits) | 31.2 | 12.6 | — | 43.8 | ||||||||||||||||
Income Taxes (Credits): | ||||||||||||||||||||
Current | 11.4 | 0.2 | 11.6 | |||||||||||||||||
Deferred | (5.2 | ) | 4.3 | (0.9 | ) | |||||||||||||||
Total | 6.2 | 4.5 | — | 10.7 | ||||||||||||||||
Net Income from Continuing Operations | $ | 25.0 | $ | 8.1 | $ | — | $ | 33.1 | ||||||||||||
Net Income Per Share from Continuing Operations: | ||||||||||||||||||||
Basic | $ | 0.11 | $ | 0.25 | $ | 0.13 | ||||||||||||||
Diluted | $ | 0.11 | $ | 0.25 | $ | 0.13 | ||||||||||||||
Average shares outstanding: | ||||||||||||||||||||
Basic | 236,387,779 | 32,199,378 | 17,709,658 | 254,097,437 | ||||||||||||||||
Diluted | 236,462,231 | 32,260,938 | 17,743,516 | 254,205,747 | ||||||||||||||||
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For the Year Ended December 31, 2009 | ||||||||||||||||||||
Historical | Historical | Pro Forma | Pro Forma | |||||||||||||||||
Old Republic | PMA | Adjustments | Notes | Old Republic | ||||||||||||||||
($ in millions, except share data) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Net premiums earned | $ | 3,111.5 | $ | 414.8 | $ | $ | 3,526.3 | |||||||||||||
Title, escrow, and other fees | 277.4 | — | 277.4 | |||||||||||||||||
Total premiums and fees | 3,388.9 | 414.8 | — | 3,803.7 | ||||||||||||||||
Net investment income | 383.5 | 36.9 | 420.4 | |||||||||||||||||
Other income | 24.8 | 79.5 | 104.3 | |||||||||||||||||
Total operating revenues | 3,797.2 | 531.2 | — | 4,328.4 | ||||||||||||||||
Realized investment gains | 6.3 | 0.5 | 6.8 | |||||||||||||||||
Total revenues | 3,803.6 | 531.7 | — | 4,335.3 | ||||||||||||||||
Benefits, Claims and Expenses: | ||||||||||||||||||||
Benefits, claims and settlement expenses | 2,591.0 | 291.2 | 2,882.2 | |||||||||||||||||
Dividends to policyholders | 7.8 | 8.7 | 16.5 | |||||||||||||||||
Underwriting, acquisition, and other expenses | 1,454.0 | 190.4 | 1,644.4 | |||||||||||||||||
Interest and other charges | 24.2 | 9.8 | 34.0 | |||||||||||||||||
Total expenses | 4,077.2 | 500.1 | — | 4,577.3 | ||||||||||||||||
Income (loss) before income taxes (credits) | (273.6 | ) | 31.6 | — | (242.0 | ) | ||||||||||||||
Income Taxes (Credits): | ||||||||||||||||||||
Current | 56.5 | 0.3 | 56.8 | |||||||||||||||||
Deferred | (230.9 | ) | (9.5 | ) | (240.4 | ) | ||||||||||||||
Total | (174.4 | ) | (9.2 | ) | — | (183.6 | ) | |||||||||||||
Net Income (Loss) from Continuing Operations | $ | (99.1 | ) | $ | 40.8 | $ | — | $ | (58.3 | ) | ||||||||||
Net Income (Loss) Per Share from Continuing Operations: | ||||||||||||||||||||
Basic | $ | (0.42 | ) | $ | 1.27 | $ | (0.23 | ) | ||||||||||||
Diluted | $ | (0.42 | ) | $ | 1.27 | $ | (0.23 | ) | ||||||||||||
Average shares outstanding: | ||||||||||||||||||||
Basic | 235,657,425 | 32,133,970 | 17,673,684 | 253,331,109 | ||||||||||||||||
Diluted | 235,657,425 | 32,186,402 | 17,673,684 | 253,331,109 | ||||||||||||||||
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COMBINED FINANCIAL STATEMENTS
($ in millions, except share data)
Note 1 — | Basis of Presentation |
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COMBINED FINANCIAL STATEMENTS — (Continued)
PMA shares outstanding as of July 9, 2010 | 32,280,474 | |||
Estimated exchange ratio | 0.55 | |||
Total Old Republic shares to be issued | 17,754,260 | |||
Old Republic closing share price on July 9, 2010 | $ | 12.85 | ||
Estimated purchase price before adjustments for stock based compensation | $ | 228.1 | ||
Estimated fair value of PMA options outstanding as of July 9, 2010 | $ | 1.1 | ||
Estimated purchase price | $ | 229.2 | ||
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COMBINED FINANCIAL STATEMENTS — (Continued)
Minimum | Maximum | |||||||
Exchange ratio | 0.50 | 0.60 | ||||||
Old Republic’s assumed share price at closing | $ | 18.70 | $ | 11.46 | ||||
Estimated purchase price | $ | 302.9 | $ | 223.1 | ||||
Increase (decrease) to pro forma shareholders’ equity: | ||||||||
Common stock | $ | (1.7 | ) | $ | 1.6 | |||
Additional paid-in capital | $ | 75.4 | $ | (7.7 | ) | |||
Retained earnings | $ | (73.7 | ) | $ | 6.1 | |||
Note 3 — | Debt |
As of March 31, 2010 | ||||||||||||
Historical | Historical | Pro forma | ||||||||||
Old Republic | PMA | Old Republic | ||||||||||
8.00% Convertible Senior Notes due 2012 | $ | 316.2 | $ | — | $ | 316.2 | ||||||
ESSOP debt with an average yield of 3.73% | 25.8 | — | 25.8 | |||||||||
Trust preferred debt | — | 62.5 | 62.5 | |||||||||
8.50% Senior Notes due 2018 | — | 54.9 | 54.9 | |||||||||
Surplus notes | — | 10.0 | 10.0 | |||||||||
Notes payable | — | 10.0 | 10.0 | |||||||||
4.25% Convertible debt due 2022 | — | — | — | |||||||||
Other miscellaneous debt | 5.1 | — | 5.1 | |||||||||
$ | 347.2 | $ | 137.4 | $ | 484.6 | |||||||
Note 4 — | Earnings per Common Share |
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COMBINED FINANCIAL STATEMENTS — (Continued)
Historical PMA basic weighted average common shares outstanding | 32,199,378 | |||
Exchange Ratio | 0.55 | |||
Pro forma PMA basic weighted average common shares outstanding | 17,709,658 | |||
Historical Old Republic basic weighted average common shares outstanding | 236,387,779 | |||
Pro forma Old Republic basic weighted average common shares outstanding | 254,097,437 | |||
Historical PMA diluted weighted average common shares outstanding | 32,260,938 | |||
Exchange Ratio | 0.55 | |||
Pro forma PMA diluted weighted average common shares outstanding | 17,743,516 | |||
Historical Old Republic diluted weighted average common shares outstanding | 236,462,231 | |||
Pro forma Old Republic diluted weighted average common shares outstanding | 254,205,747 | |||
Pro forma Old Republic net income from continuing operations | $ | 33.1 | ||
Pro forma Old Republic net income per share from continuing operations: | ||||
Basic | $ | 0.13 | ||
Diluted | $ | 0.13 | ||
Historical PMA basic weighted average common shares outstanding | 32,133,970 | |||
Exchange Ratio | 0.55 | |||
Pro forma PMA basic weighted average common shares outstanding | 17,673,684 | |||
Historical Old Republic basic weighted average common shares outstanding | 235,657,425 | |||
Pro forma Old Republic basic weighted average common shares outstanding | 253,331,109 | |||
Pro forma Old Republic diluted weighted average common shares outstanding | 253,331,109 | * | ||
Pro forma Old Republic net loss from continuing operations | $ | (58.3 | ) | |
Pro forma Old Republic net loss per share from continuing operations: | ||||
Basic | $ | (0.23 | ) | |
Diluted | $ | (0.23 | )* | |
* | Common share equivalents have been excluded from diluted earnings per share calculations because their effect would be antidilutive. |
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COMBINED FINANCIAL STATEMENTS — (Continued)
Note 5 — | Book Value per Share |
Historical | Pro Forma | |||||||
Old Republic | Old Republic | |||||||
Book value per common share calculation | ||||||||
Total shareholders’ equity | $ | 3,995.8 | $ | 4,359.3 | ||||
Shares | 236,466,473 | 254,204,589 | ||||||
Book value per common share | $ | 16.90 | $ | 17.15 | ||||
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For the Three Months Ended March 31, 2010 | For the Year Ended December 31, 2009 | |||||||||||||||||||||||||||||||
Old Republic | PMA | Old Republic | PMA | |||||||||||||||||||||||||||||
Pro | Pro | Pro | Pro | |||||||||||||||||||||||||||||
Forma | Forma | Forma | Forma | |||||||||||||||||||||||||||||
Historical | Combined | Historical | Equivalent | Historical | Combined | Historical | Equivalent | |||||||||||||||||||||||||
Basic earnings per share from continuing operations | $ | 0.11 | $ | 0.13 | $ | 0.25 | $ | 0.07 | $ | (0.42 | ) | $ | (0.23 | ) | $ | 1.27 | $ | (0.13 | ) | |||||||||||||
Diluted earnings per share from continuing operations | $ | 0.11 | $ | 0.13 | $ | 0.25 | $ | 0.07 | $ | (0.42 | ) | $ | (0.23 | ) | $ | 1.27 | $ | (0.13 | ) | |||||||||||||
Dividends declared | $ | 0.1725 | $ | 0.1725 | — | $ | 0.09 | $ | 0.68 | $ | 0.68 | — | $ | 0.37 | ||||||||||||||||||
Book value per share | $ | 16.90 | $ | 17.15 | $ | 12.96 | $ | 9.43 | $ | 16.49 | N/A | $ | 12.46 | N/A |
Old Republic | PMA Class A | |||||||
Common Stock | Common Stock | |||||||
June 9, 2010 | $ | 12.91 | $ | 6.11 | ||||
July 30, 2010 | $ | 12.51 | $ | 6.71 |
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Old Republic | PMA | |||||||||||||||||||||||||||
Cash | Cash | |||||||||||||||||||||||||||
High | Low | Dividends | High | Low | Dividends | |||||||||||||||||||||||
1st quarter | 2007 | $ | 23.74 | $ | 21.38 | $ | .15 | $ | 9.77 | $ | 8.40 | $ | — | |||||||||||||||
2nd quarter | 2007 | 22.69 | 20.95 | .16 | 11.40 | 9.12 | — | |||||||||||||||||||||
3rd quarter | 2007 | 21.91 | 16.56 | .16 | 11.17 | 8.63 | — | |||||||||||||||||||||
4th quarter | 2007 | $ | 19.57 | $ | 13.57 | $ | .16 | $ | 10.69 | $ | 8.05 | $ | — | |||||||||||||||
1st quarter | 2008 | $ | 15.96 | $ | 11.85 | $ | .16 | $ | 9.14 | $ | 7.45 | $ | — | |||||||||||||||
2nd quarter | 2008 | 15.55 | 11.84 | .17 | 10.23 | 8.24 | — | |||||||||||||||||||||
3rd quarter | 2008 | 17.25 | 9.19 | .17 | 12.00 | 8.00 | — | |||||||||||||||||||||
4th quarter | 2008 | $ | 12.99 | $ | 6.77 | $ | .17 | $ | 9.47 | $ | 3.46 | $ | — | |||||||||||||||
1st quarter | 2009 | $ | 12.80 | $ | 7.24 | $ | .17 | $ | 7.20 | $ | 3.50 | $ | — | |||||||||||||||
2nd quarter | 2009 | 12.18 | 8.75 | .17 | 5.35 | 3.70 | — | |||||||||||||||||||||
3rd quarter | 2009 | 12.85 | 8.98 | .17 | 6.33 | 4.27 | — | |||||||||||||||||||||
4th quarter | 2009 | $ | 12.49 | $ | 10.03 | $ | .17 | $ | 7.44 | $ | 4.64 | $ | — | |||||||||||||||
1st quarter | 2010 | $ | 12.75 | $ | 10.02 | $ | .1725 | $ | 6.89 | $ | 5.60 | $ | — |
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OLD REPUBLIC INTERNATIONAL CORPORATION vs. S&P 500 vs. Peer Group
(For the five years ended December 31, 2009)
Dec 04 | Dec 05 | Dec 06 | Dec 07 | Dec 08 | Dec 09 | |||||||||||||||||||||||||
ORI | $ | 100.00 | $ | 110.52 | $ | 125.81 | $ | 86.11 | $ | 70.30 | $ | 63.08 | ||||||||||||||||||
S&P 500 | 100.00 | 104.91 | 121.48 | 128.16 | 80.74 | 102.11 | ||||||||||||||||||||||||
Peer Group | 100.00 | 115.44 | 132.48 | 122.50 | 95.42 | 106.94 | ||||||||||||||||||||||||
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12/31/2004 | 12/31/2005 | 12/31/2006 | 12/31/2007 | 12/31/2008 | 12/31/2009 | |||||||||||||||||||||||||
PMA Capital | $ | 100.00 | $ | 88.21 | $ | 89.08 | $ | 79.42 | $ | 68.41 | $ | 60.87 | ||||||||||||||||||
S&P 500 | 100.00 | 104.83 | 121.20 | 127.85 | 81.12 | 102.15 | ||||||||||||||||||||||||
S&P Super P/C | 100.00 | 116.61 | 130.75 | 113.56 | 88.06 | 93.15 | ||||||||||||||||||||||||
S&P 600 P/C | 100.00 | 126.59 | 139.64 | 122.88 | 113.63 | 97.86 | ||||||||||||||||||||||||
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• | the ability to consummate the merger; |
• | the ability to integrate the operations of Old Republic and PMA; | |
• | the amount and timing of any cost savings synergies or other efficiencies expected to result from the merger; | |
• | the effects of competition in our markets; | |
• | the current economic condition and expected trends in the industries we serve; | |
• | the various risks and other factors considered by the respective boards of Old Republic and PMA as described under “The Merger — PMA’s Reasons for the Merger,” “The Merger — Recommendations of the PMA Board of Directors with Respect to the Merger” and “The Merger — Old Republic’s Reasons for the Merger”; | |
• | the impact of political, regulatory and rating agency developments; | |
• | future and pro forma financial condition or results of operations and future revenues and expenses; and | |
• | business strategy and other plans and objectives for future operations. |
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• | PMA and Old Republic have similar cultures, core values and business principles that will foster growth and expansion. Both companies have similar business and operational philosophies of disciplined underwriting, risk management and claims performance. Likewise, both companies manage their businesses for long-term profitability and success. | |
• | Old Republic’s stated business strategy is to increase penetration in the property and casualty business marketplace. PMA’s business has little to no overlap with Old Republic’s business operations and distribution channel partners. | |
• | Old Republic pursues a well diversified business approach, and Old Republic values that approach in PMA as well. PMA’s fee-based businesses now represent 16% of PMA’s total revenues, and are anticipated to continue to grow. Old Republic is very interested and supportive of PMA’s insurance and fee-based operations, and PMA plans to continue to grow these business segments. |
• | the risk that the merger does not close and its effect on PMA’s business and the impact of the resolution of the financial examination being conducted by the Pennsylvania Insurance Department; | |
• | the risk that the merger may be delayed; | |
• | the merger consideration represents a discount to PMA’s current book value and the highest price at which PMA’s stock has traded during recent years; | |
• | the potential negative impact that the announcement of the merger may have on PMA’s employees, customers, clients and other partners; | |
• | the significant costs involved and the diversion of management resources in negotiating the merger agreement, closing the merger and integrating PMA with Old Republic’s operations; |
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• | the inherent risks and financial condition of Old Republic’s mortgage guaranty and title insurance businesses and the effect those businesses can have on the value of Old Republic’s common stock; | |
• | the merger agreement prohibits PMA from soliciting alternative acquisition proposals; and | |
• | the potential that the termination fee may discourage an alternative proposal or result in a lower price in an alternative transaction. |
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• | reviewed certain publicly available business and financial information relating to PMA and Old Republic; | |
• | reviewed certain internal financial and operating information with respect to the business, operations and prospects of PMA furnished to or discussed with BofA Merrill Lynch by the management of PMA, including certain financial forecasts relating to PMA prepared by or at the direction of and approved by the management of PMA under certain scenarios (such forecasts, “PMA Forecasts”); | |
• | reviewed certain internal financial and operating information with respect to the business, operations and prospects of Old Republic furnished to or discussed with BofA Merrill Lynch by the management of Old Republic, including certain financial forecasts relating to Old Republic prepared by the management of Old Republic for the year ended December 31, 2010 (such forecasts, “Old Republic 2010 Forecasts”); | |
• | reviewed certain financial forecasts relating to Old Republic prepared by or at the direction of and approved by the management of PMA for the years ended December 31, 2011 through December 31, 2014 under certain scenarios (such forecasts, “Old Republic Extended Forecasts”); | |
• | reviewed certain reports regarding reserves for loss and loss adjustment expense of PMA prepared by an independent actuarial firm engaged by PMA which were made available to BofA Merrill Lynch by PMA; | |
• | discussed the past and current business, operations, financial condition and prospects of PMA with members of senior managements of PMA and Old Republic, and discussed the past and current business, operations, financial condition and prospects of Old Republic with members of senior managements of PMA and Old Republic; | |
• | discussed with the management of PMA its assessment of the financial examination of PMA’s insurance subsidiaries currently being conducted by the Pennsylvania Insurance Department, including the status of such examination and the potential impact on PMA of any action that may be required to be taken as a result thereof; | |
• | reviewed the potential pro forma financial impact of the merger on the future financial performance of Old Republic; | |
• | participated in certain discussions and negotiations among representatives of PMA and Old Republic and their financial and legal advisors; | |
• | reviewed the trading histories for PMA class A common stock and Old Republic common stock and the valuation multiples implied by the merger for PMA class A common stock and a comparison of such trading histories and such valuation multiples with each other and with the trading histories and valuation multiples of other companies BofA Merrill Lynch deemed relevant; | |
• | compared certain financial and stock market information of PMA and Old Republic with similar information of other companies BofA Merrill Lynch deemed relevant; | |
• | considered the results of BofA Merrill Lynch’s efforts on behalf of PMA to solicit, at the direction of PMA, indications of interest from third parties with respect to a possible acquisition of PMA; | |
• | reviewed a draft, dated June 4, 2010, of the merger agreement; and | |
• | performed such other analyses and studies and considered such other information and factors as BofA Merrill Lynch deemed appropriate. |
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• | W.R. Berkley Corporation; | |
• | Markel Corporation; | |
• | American Financial Group, Inc.; | |
• | HCC Insurance Holdings, Inc.; | |
• | ProAssurance Corporation; | |
�� | ||
• | RLI Corp.; | |
• | Tower Group, Inc.; | |
• | Argo Group International Holdings, Ltd.; | |
• | Harleysville Group Inc.; | |
• | Selective Insurance Group, Inc.; |
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• | AmTrust Financial Services, Inc.; | |
• | The Navigators Group, Inc.; | |
• | National Interstate Corporation; | |
• | United America Indemnity, Ltd.; | |
• | NYMAGIC, Inc.; | |
• | Employers Holdings, Inc.; | |
• | Amerisafe, Inc.; | |
• | SeaBright Holdings, Inc.; and | |
• | Eastern Insurance Holdings, Inc. |
Price/3/31/10 | ||||||||||||
Book Value | Price/2011E | 2011E | ||||||||||
per Share(1) | Operating EPS | Return on Equity | ||||||||||
Diversified Specialty | ||||||||||||
W.R. Berkley Corporation | 1.12 | x | 10.0 | x | 10.3 | % | ||||||
Markel Corporation | 1.14 | x | 17.6 | x | 6.0 | % | ||||||
American Financial Group, Inc. | 0.71 | x | 7.1 | x | 9.2 | % | ||||||
HCC Insurance Holdings, Inc. | 0.92 | x | 8.2 | x | 10.0 | % | ||||||
ProAssurance Corporation | 1.05 | x | 11.0 | x | 8.6 | % | ||||||
RLI Corp. | 1.32 | x | 14.0 | x | 8.8 | % | ||||||
Tower Group, Inc. | 0.87 | x | 6.1 | x | 12.7 | % | ||||||
Argo Group International Holdings, Ltd. | 0.54 | x | 7.3 | x | 7.1 | % | ||||||
Harleysville Group Inc. | 1.11 | x | 9.7 | x | 10.8 | % | ||||||
Selective Insurance Group, Inc. | 0.76 | x | 9.6 | x | 7.7 | % | ||||||
AmTrust Financial Services, Inc. | 1.26 | x | 5.5 | x | 18.7 | % | ||||||
The Navigators Group, Inc. | 0.79 | x | 10.7 | x | 7.1 | % | ||||||
National Interstate Corporation | 1.32 | x | 9.3 | x | 12.5 | % | ||||||
United America Indemnity, Ltd. | 0.53 | x | 8.3 | x | 6.0 | % | ||||||
NYMAGIC, Inc. | 0.74 | x | NA | x | NA | % | ||||||
Mean | 0.95 | x | 9.6 | x | 9.7 | % | ||||||
Workers’ Compensation Focused | ||||||||||||
Employers Holdings, Inc. | 0.70 | x | 12.2 | x | 5.4 | % | ||||||
Amerisafe, Inc. | 1.03 | x | 8.2 | x | 11.1 | % | ||||||
SeaBright Holdings, Inc. | 0.58 | x | 11.0 | x | 5.0 | % | ||||||
Eastern Insurance Holdings, Inc. | 0.64 | x | 11.5 | x | 5.0 | % | ||||||
Mean | 0.74 | x | 10.7 | x | 6.6 | % | ||||||
Overall Mean | 0.90 | x | 9.9 | x | 9.0 | % |
(1) | Based on primary book value per share, which excludes the dilutive impact of options, warrants and restricted stock. |
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Implied Old Republic | ||||||||||||||||||||
Implied PMA Valuation | Valuation | |||||||||||||||||||
Selected Publicly Traded Companies | per Share | per Share | Implied Exchange Ratio | |||||||||||||||||
Analysis — | Minimum | Maximum | Minimum | Maximum | Minimum | Maximum | ||||||||||||||
Book value multiple | $ | 6.02 | $ | 8.43 | $ | 11.83 | $ | 15.21 | 0.3958x | 0.7124x | ||||||||||
Earnings multiple — analysts estimates (2011) | $ | 5.81 | $ | 7.47 | $ | 11.95 | $ | 14.34 | 0.4052x | 0.6251x |
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Implied Old Republic | ||||||||||||||||||||
Implied PMA Valuation | Valuation | |||||||||||||||||||
per Share | per Share | Implied Exchange Ratio | ||||||||||||||||||
Discounted Cash Flow Analysis | Minimum | Maximum | Minimum | Maximum | Minimum | Maximum | ||||||||||||||
PMA Case 1/Old Republic Base Case | $ | 3.74 | $ | 5.53 | $ | 10.37 | $ | 13.31 | 0.2813x | 0.5330x | ||||||||||
PMA Case 2/Old Republic Base Case | $ | 3.41 | $ | 5.05 | $ | 10.37 | $ | 13.31 | 0.2565x | 0.4869x | ||||||||||
PMA Case 3/Old Republic Base Case | $ | 5.40 | $ | 7.64 | $ | 10.37 | $ | 13.31 | 0.4055x | 0.7365x | ||||||||||
PMA Case 4/Old Republic Base Case | $ | 2.55 | $ | 3.39 | $ | 10.37 | $ | 13.31 | 0.1916x | 0.3268x |
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• | high and low trading prices of PMA class A common stock and Old Republic common stock during the52-week period ended June 7, 2010, which implied an exchange ratio of between 0.2755x and 0.8519x; and | |
• | the future public market share price targets of PMA class A common stock and Old Republic common stock as reported by various analysts following the PMA and Old Republic common stocks, which implied an exchange ratio of between 0.4211x and 0.6875x. |
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• | a financial institution or insurance company; | |
• | a tax-exempt organization; | |
• | certain U.S. expatriates; | |
• | a person that is not a U.S. Holder; | |
• | a regulated investment company; | |
• | a pass-through entity or an investor in such an entity; | |
• | a trader in securities that electsmark-to-market accounting; | |
• | a dealer or broker in securities or currencies; | |
• | a person that holds PMA class A common stock as part of a hedge, straddle, constructive sale or conversion transaction; | |
• | a person that acquired its shares of PMA class A common stock pursuant to the exercise of employee stock options or otherwise in connection with the performance of services; |
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• | a person who holds shares of PMA class A common stock in an individual retirement or other tax-deferred account; | |
• | a person that has a functional currency other than the U.S. dollar; and | |
• | a person subject to the alternative minimum tax. |
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• | a U.S. Holder whose shares of PMA class A common stock are exchanged in the merger for shares of Old Republic common stock will not recognize gain or loss with respect to such PMA class A common stock, except as to cash, if any, received in lieu of a fractional share of Old Republic common stock (as discussed below); | |
• | a U.S. Holder’s aggregate tax basis in shares of Old Republic common stock received in the merger in exchange for PMA class A common stock (including any fractional shares deemed received and exchanged for cash as described below) will be the same as the aggregate tax basis of the PMA class A common stock surrendered in the merger; | |
• | a U.S. Holder’s holding period for shares of Old Republic common stock received in the merger (including any fractional shares deemed received and exchanged for cash, as described below) will generally include the holding period for the shares of PMA class A common stock surrendered in exchange therefor in the merger; | |
• | if a U.S. Holder acquired different blocks of PMA class A common stock at different times or at different prices, such shareholder’s tax basis and holding periods in its Old Republic common stock will be determined with reference to each block of PMA class A common stock; and | |
• | to the extent that a U.S. Holder receives cash in lieu of a fractional share of Old Republic common stock, the U.S. Holder will be deemed to have received that fractional share in the merger and then to have sold such fractional share for cash in redemption of that fractional share. The shareholder will generally recognize capital gain or loss equal to the difference between the cash received and the tax basis allocable to that fractional share of Old Republic common stock. This capital gain or loss will generally be long-term capital gain or loss if the U.S. Holder’s holding period for its shares of PMA class A common stock exchanged exceeds one year at the closing date. |
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• | adoption by holders of PMA class A common stock of the merger agreement; | |
• | the approval of the listing of the Old Republic common stock to be issued in the merger on the NYSE, subject to official notice of issuance; |
• | effectiveness of the registration statement of which this proxy statement/prospectus is a part and the absence of a stop order or proceedings threatened or initiated by the SEC for that purpose; |
• | absence of any order, decree or injunction issued, and of any action taken by any court or agency or other law preventing or making illegal the consummation of the merger; and | |
• | the waiting period (and any extension thereof) applicable to the consummation of the merger under the HSR Act will have expired or been terminated and all regulatory approvals required to complete the merger will have been obtained. |
• | the truth and correctness of PMA’s representations and warranties in the merger agreement (in certain circumstances, subject to materiality or material adverse effect qualifications) as of the date of the merger agreement and as of the closing date as though made on and as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date); | |
• | the performance by PMA, in all material respects, of all of its obligations under the merger agreement; | |
• | receipt of a certificate executed by the Chief Executive Officer or the Chief Financial Officer of PMA as to the satisfaction of the conditions described in the preceding two bullets; | |
• | receipt of a legal opinion from Old Republic’s counsel to the effect that the merger should qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code; | |
• | since December 31, 2009, the absence of any event or condition that has had or is reasonably likely to have, individually or in the aggregate, a material adverse effect on PMA; and | |
• | receipt of voluntary written terminations of employment or severance agreements with the Chief Executive Officer of PMA and six of the eight other PMA officers party to such agreements effective prior to the merger. |
• | the truth and correctness of Old Republic’s representations and warranties in the merger agreement (in certain circumstances, subject to materiality or material adverse effect qualifications) as of the date of the |
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merger agreement and as of the closing date as though made on and as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date); |
• | the performance by Old Republic, in all material respects, of all of its obligations under the merger agreement; | |
• | receipt of a certificate executed by the Chief Executive Officer or the Chief Financial Officer of Old Republic as to the satisfaction of the conditions described in the preceding two bullets; | |
• | receipt of a legal opinion from Ballard Spahr LLP to the effect that (i) the merger should qualify as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) PMA, Merger Sub and Old Republic each will be a “party to the reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and (iii) no gain or loss will be recognized by the PMA shareholders upon the receipt of the merger consideration (except cash received in lieu of fractional shares); and | |
• | since December 31, 2009, the absence of any event or condition that has had or is reasonably likely to have, individually or in the aggregate, a material adverse effect on Old Republic. |
• | due incorporation, good standing, qualification and corporate power, organizational documents, corporate records and governmental licenses, authorizations, permits and approvals to conduct its business; | |
• | corporate power and authority to enter into, and perform its obligations under, the merger agreement, enforceability of the merger agreement, approval of the merger agreement by the PMA board of directors, and the determination of the PMA board of directors that the merger agreement is in the best interests of PMA and its shareholders and that the merger agreement will be submitted to the PMA shareholders for adoption; | |
• | required governmental filings and approvals; | |
• | the absence of conflicts between the execution, delivery or performance of the merger agreement and PMA’s or its subsidiaries’ organizational documents, any applicable law or order, certain of PMA’s contracts, or any governmental licenses, authorizations, permits or approvals, and the absence of any liens resulting from the execution, delivery or performance of the merger agreement; | |
• | capitalization and outstanding stock options and restricted stock awards; | |
• | PMA’s subsidiaries; | |
• | filings with the SEC and internal controls and procedures; | |
• | financial statements; |
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• | statutory statements of PMA’s insurance subsidiaries filed with state insurance departments; | |
• | the accuracy of information provided by PMA for inclusion in this proxy statement/prospectus and compliance with SEC rules and regulations; | |
• | the absence of a material adverse effect on PMA since December 31, 2009; | |
• | the absence of undisclosed liabilities; | |
• | compliance with applicable laws, including insurance laws; | |
• | the absence of material litigation; | |
• | conduct of, and matters related to, PMA’s insurance subsidiaries, reinsurance matters, actuarial analyses, and policy forms and marketing materials; | |
• | the determination of reserves; | |
• | PMA’s owned and leased real property; | |
• | confirming receipt of the opinion from PMA’s financial advisor described herein; | |
• | tax matters; | |
• | employee benefit plan matters, post-employment compensation and deferred compensation matters; | |
• | employee and labor matters; | |
• | environmental matters; | |
• | intellectual property rights; | |
• | material contracts of PMA and its subsidiaries; | |
• | finders’ fees due in connection with the merger; and | |
• | the absence of certain affiliate transactions between PMA and its directors, officers or shareholders. |
• | due incorporation, good standing, qualification and corporate power, governmental licenses, authorizations, permits and approvals to conduct its business; | |
• | corporate power and authority to enter into, and perform its obligations under, the merger agreement, enforceability of the merger agreement and approval of the merger agreement by the board of directors of Old Republic and Merger Sub; | |
• | required governmental filings and approvals; | |
• | the absence of conflicts between the execution, delivery or performance of the merger agreement and Old Republic’s or Merger Sub’s organizational documents, any applicable law or order, or certain agreements of Old Republic or Merger Sub and the absence of any liens resulting from the execution, delivery or performance of the merger agreement; | |
• | capitalization of Old Republic; | |
• | filings with the SEC by Old Republic and internal controls and procedures of Old Republic; | |
• | financial statements of Old Republic; | |
• | accuracy of information supplied by Old Republic or Merger Sub for inclusion in this proxy statement/prospectus; | |
• | the absence of a material adverse effect on Old Republic since December 31, 2009; | |
• | the absence of undisclosed liabilities; |
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• | compliance with applicable laws, including insurance laws; | |
• | the absence of certain material litigation or governmental orders; | |
• | tax matters; and | |
• | the absence of finders’ fees due in connection with the merger. |
• | changes in global, national or regional political conditions (including acts of terrorism or war) or changes in general business, economic or market conditions, including changes generally in prevailing interest rates, credit markets or securities markets; | |
• | changes in generally accepted accounting practices, (“GAAP”) or regulatory accounting requirements generally applicable to the relevant industries after the date of the merger agreement; | |
• | changes in laws, rules or regulations of general applicability to companies in the industries in which the parties operate after the date of the merger agreement; | |
• | the execution of the merger agreement or the public disclosure of the merger agreement; or | |
• | any actions or omissions taken with the prior written consent of the other party or expressly required by the terms of the merger agreement. |
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• | amend its charter or by-laws or similar governing documents; | |
• | take any action to exempt any entity (other than Old Republic) from any state takeover statute or similar provisions of PMA’s governing documents or terminate or amend any provisions of any confidentiality or standstill agreements; | |
• | declare, make or pay any dividend or other distribution (whether in cash, stock, securities or property) in respect of any of its capital stock, except for dividends or distributions by any wholly owned subsidiary of PMA to PMA or to any other wholly owned subsidiary of PMA; | |
• | adjust, split, combine, subdivide or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock; | |
• | repurchase, redeem or otherwise acquire any PMA securities or securities of a PMA subsidiary, except for in payment of the exercise price or withholding taxes in connection with the exercise of stock options or the vesting of restricted stock; | |
• | grant any stock options, stock appreciation rights, restricted shares, deferred equity units or other equity-based award with respect to PMA class A common stock or grant any third party the right to acquire any capital stock of PMA; | |
• | issue any additional shares of PMA class A common stock or other capital stock of PMA except pursuant to the settlement of outstanding equity awards; | |
• | acquire any corporation or other business organization or, other than in the ordinary course of business and consistent with past practices, make a material investment in (whether through the acquisition of stock, assets or otherwise) any other person; | |
• | sell, transfer, pledge, lease, grant, license, mortgage, encumber, subject to a lien or otherwise dispose of any of its properties or assets or cancel, release or assign any indebtedness or claim, except in the ordinary course of business consistent with past practice or pursuant to existing contracts; | |
• | incur, guarantee, assume or otherwise become responsible for any indebtedness; | |
• | increase the compensation or other benefits payable or provided to PMA’s current or former directors, officers or employees except as required by law or pursuant to existing contracts; | |
• | pay any pension, severance or retirement benefits to any employee; | |
• | enter into any employment, change of control, severance or retention agreement with any employee of PMA; | |
• | establish, adopt, enter into or amend any company benefit plan for the benefit of any current or former directors, officers or employees or any of their beneficiaries; | |
• | accelerate the vesting of stock-based compensation or other long-term compensation under any company benefit plan; | |
• | enter into any collective bargaining agreement; | |
• | commence or settle any material claim, action or proceeding; | |
• | modify or amend, except in the ordinary course of business and consistent with past practice, or knowingly violate or terminate certain contracts material to PMA; | |
• | enter into certain new agreements that would materially restrict the business of PMA; | |
• | materially change any of its accounting policies (whether for financial accounting or tax purposes), except as required by applicable law, GAAP or regulatory guidelines; |
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• | file or amend any material tax return, make or change any material tax election or settle or compromise any material tax liability other than in the ordinary course of business as required by law; | |
• | take any action or knowingly fail to take any action that is reasonably likely to prevent the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; | |
• | enter into any new line of business or change in any material respect its investment, underwriting, risk and asset liability management and other operating policies, except as required by law or regulations; | |
• | transfer ownership, or grant any license or other rights to any person regarding any material company intellectual property; | |
• | take any action or willfully fail to take any action that would reasonably be expected to result in any condition to the merger not being satisfied; or | |
• | agree to or adopt any board resolution in support of any of the prohibited actions set forth above. |
• | amend, repeal or otherwise modify any provision of its certificate of incorporation or by-laws in a manner that would adversely affect PMA, its shareholders or the merger; | |
• | take any action or knowingly fail to take any action that is reasonably likely to prevent the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; | |
• | take any action or willfully fail to take any action that would reasonably be expected to result in any condition to the merger not being satisfied; | |
• | take any action that would prevent, materially impede or materially delay the merger; or | |
• | agree to take, commit to take or adopt any board resolution in support of any of the prohibited actions set forth above. |
• | solicit, initiate, encourage or facilitate or take any other action designed to facilitate any inquiries or proposals regarding any alternative proposals relating to any alternative transactions; | |
• | participate in any discussions or negotiations regarding any alternative transaction; or | |
• | enter into any agreement regarding any alternative transaction. |
• | any direct or indirect acquisition by any third party (other than Old Republic and its subsidiaries) of more than 20% of the outstanding shares of PMA or any of its subsidiaries or more than 20% of the outstanding voting power of any new series or new class of preferred stock that would be entitled to vote with respect to the proposed merger, including pursuant to a tender offer or exchange offer; | |
• | any merger, share exchange, consolidation or other business combination involving PMA or any of its subsidiaries (other than the proposed merger); |
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• | any transaction pursuant to which any third party (other than Old Republic and its subsidiaries) would acquire or would acquire control of assets (including equity securities of any subsidiary of PMA) of PMA or its subsidiaries that represent more than 20% of the fair market value of all of the assets, net revenues or net income of PMA and its subsidiaries, taken as a whole, immediately prior to such transaction; or | |
• | any other consolidation, business combination, recapitalization or similar transaction involving PMA or any of its subsidiaries other than the transactions contemplated by the merger agreement. |
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• | withdraw, modify or qualify or propose publicly to withdraw, modify or qualify the PMA board of directors recommendation regarding the merger proposal; | |
• | take any public action or make any public statement in connection with the PMA special shareholders meeting substantively inconsistent with the PMA board of directors recommendation regarding the merger proposal; or | |
• | approve or recommend, or publicly propose to approve or recommend or fail to recommend against any alternative proposal (each of the actions set forth in this bullet point or in the two preceding bullet points is referred to in this proxy statement/prospectus as a “PMA change of recommendation”). |
• | PMA receives a superior proposal and such superior proposal has not been withdrawn; | |
• | the board of directors of PMA determines in good faith (after consultation with outside legal counsel), that in light of a superior proposal, the failure to effect a PMA change of recommendation would be inconsistent with its fiduciary duties under Pennsylvania law; | |
• | Old Republic has received written notice from PMA at least three business days prior to the date the PMA change of recommendation occurs and such notice states that PMA has received an alternative proposal which the board of directors has determined is a superior proposal and that PMA intends to effect a PMA change of recommendation and how such change will be made and also includes the identity of the third party making the proposal and a summary of the material terms of such proposal (and in the event the alternative proposal is materially amended, PMA must provide a new notice at least two business days before effecting any PMA change of recommendation); and | |
• | during such notice period, PMA and its advisors have negotiated in good faith with Old Republic (if Old Republic desires to negotiate) to make adjustments in the terms and conditions of the merger agreement such that the alternative proposal would no longer constitute a superior proposal. |
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• | by mutual written consent of Old Republic and PMA; | |
• | subject to certain limitations described in the merger agreement, by either Old Republic or PMA, if: |
• | the merger shall not have been consummated on or before December 31, 2010, unless the party seeking to terminate the merger agreement failed to perform or observe the applicable covenants and agreements under the merger agreement; | |
• | a required regulatory approval has been denied or any governmental entity has taken action permanently enjoining or otherwise prohibiting or making illegal the merger, including with respect to antitrust matters, if HSR approval has not been obtained within 120 days of the filing of the HSR application (such 120 day period to be extended for another 120 days if HSR approval is a reasonable possibility); |
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• | the other party has breached a representation, warranty, covenant or agreement that would preclude the satisfaction of certain conditions to the consummation of the merger and such breach is not remedied within the applicable cure period; | |
• | the PMA board of directors shall have (i) failed to recommend the approval and adoption of the merger agreement to the PMA shareholders, (ii) made any PMA change of recommendation, (iii) approved or recommended, or publicly proposed to approve or recommend, any alternative proposal or (iv) failed to recommend to PMA’s shareholders that they reject any tender offer or exchange offer that constitutes an alternative transaction within the ten business day period specified in Rule14e-2(a) of the Exchange Act; or | |
• | the PMA shareholders have not adopted the merger agreement at the PMA special meeting. |
• | any direct or indirect acquisition by any third party (other than Old Republic and its subsidiaries) 50% or more of the outstanding shares of PMA class A common stock of 50% or more of the voting power of any new series or new class of preferred stock that would be entitled to vote with respect to the proposed merger, including pursuant to a tender offer or exchange offer; |
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• | any merger, share exchange, consolidation or other business combination involving PMA or any of its subsidiaries (other than the proposed Old Republic merger) to which PMA is a party and in which the PMA shareholders will not hold at least 662/3% of the total voting power of the surviving company; | |
• | any transaction pursuant to which any third party (other than Old Republic and its subsidiaries) would acquire or would acquire control of assets (including equity securities of any subsidiary of PMA) of PMA or its subsidiaries that represent more than 50% of the fair market value of all of the assets, net revenues or net income of PMA and its subsidiaries, taken as a whole, immediately prior to such transaction; or | |
• | any other consolidation, business combination, recapitalization or similar transaction involving PMA or any of its subsidiaries other then the transactions contemplated by the merger agreement to which PMA is a party and in which the PMA shareholders will not hold at least 662/3% of the total voting power of the surviving company. |
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• | Disciplined risk selection, evaluation, and pricing to reduce uncertainty and adverse selection; | |
• | Augmenting the predictability of expected outcomes through insurance of the largest number of homogeneous risks as to each type of coverage; | |
• | Reducing the insurance portfolio risk profile through: |
• | diversification and spread of insured risks; and | |
• | assimilation of uncorrelated asset and liability exposures across economic sectors that tend to offset or counterbalance one another; and |
• | Effectively managing gross and net limits of liability through appropriate use of reinsurance. |
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Net Revenues(b) | 2009 | 2008 | 2007 | |||||||||
($ in Millions) | ||||||||||||
Years Ended December 31: | ||||||||||||
General | $ | 2,052.7 | $ | 2,255.9 | $ | 2,438.0 | ||||||
Mortgage Guaranty | 746.1 | 690.0 | 608.3 | |||||||||
Title | 914.1 | 681.3 | 878.5 | |||||||||
Corporate & Other — net(c) | 138.1 | 132.1 | 131.4 | |||||||||
Consolidated realized investment gains (losses) | 6.3 | (486.4 | ) | 70.3 | ||||||||
Consolidation elimination adjustments | (53.8 | ) | (35.3 | ) | (35.8 | ) | ||||||
Consolidated | $ | 3,803.6 | $ | 3,237.7 | $ | 4,091.0 | ||||||
Income (Loss) Before Taxes | 2009 | 2008 | 2007 | |||||||||
Years Ended December 31: | ||||||||||||
General | $ | 200.1 | $ | 294.3 | $ | 418.0 | ||||||
Mortgage Guaranty | (486.4 | ) | (594.3 | ) | (110.4 | ) | ||||||
Title | 2.1 | (46.3 | ) | (14.7 | ) | |||||||
Corporate & Other — net(c) | 4.0 | 13.5 | 15.1 | |||||||||
Consolidated realized investment gains (losses) | 6.3 | (486.4 | ) | 70.3 | ||||||||
Consolidated | $ | (273.6 | ) | $ | (819.2 | ) | $ | 378.4 | ||||
Assets | 2009 | 2008 | 2007 | |||||||||
As of December 31: | ||||||||||||
General | $ | 9,920.8 | $ | 9,482.9 | $ | 9,769.9 | ||||||
Mortgage Guaranty | 3,233.4 | 2,973.1 | 2,523.8 | |||||||||
Title | 852.8 | 762.4 | 770.4 | |||||||||
Corporate & Other — net(c) | 503.5 | 509.5 | 437.9 | |||||||||
Consolidation elimination adjustments | (320.5 | ) | (462.0 | ) | (211.5 | ) | ||||||
Consolidated | $ | 14,190.0 | $ | 13,266.0 | $ | 13,290.6 | ||||||
Shareholders’ Equity | 2009 | 2008 | 2007 | |||||||||
As of December 31: | ||||||||||||
General | $ | 2,548.2 | $ | 2,258.7 | $ | 2,536.7 | ||||||
Mortgage Guaranty | 581.7 | 828.0 | 1,237.7 | |||||||||
Title | 288.6 | 260.0 | 334.9 | |||||||||
Corporate & Other — net(c) | 516.9 | 433.7 | 475.4 | |||||||||
Consolidated elimination adjustments | (44.1 | ) | (40.2 | ) | (43.2 | ) | ||||||
Consolidated | $ | 3,891.4 | $ | 3,740.3 | $ | 4,541.6 | ||||||
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(a) | Reference is made to the table in Note 6 of the Notes to Consolidated Financial Statements for the year ended December 31, 2009, incorporated herein by reference, which shows the contribution of each subcategory to the consolidated net revenues and income or loss before income taxes of Old Republic’s insurance industry segments. | |
(b) | Revenues consist of net premiums, fees, net investment and other income earned; realized investment gains (losses) are shown in total for all groups combined since the investment portfolio is managed as a whole. | |
(c) | Represents amounts for Old Republic’s holding company parent, minor corporate services subsidiaries, and a small life and health insurance operation. |
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Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in Millions) | ||||||||||||
General Insurance Group: | ||||||||||||
Overall Experience: | ||||||||||||
Net Premiums Earned | $ | 1,782.5 | $ | 1,989.3 | $ | 2,155.1 | ||||||
Claim Ratio | 75.9 | % | 72.2 | % | 67.4 | % | ||||||
Policyholders’ Dividend Benefit | .4 | .8 | .4 | |||||||||
Expense Ratio | 25.8 | 24.2 | 24.1 | |||||||||
Composite Ratio | 102.1 | % | 97.2 | % | 91.9 | % | ||||||
Experience by Major Coverages: | ||||||||||||
Commercial Automobile (Principally Trucking): | ||||||||||||
Net Premiums Earned | $ | 652.8 | $ | 694.5 | $ | 752.4 | ||||||
Claim Ratio | 71.3 | % | 75.8 | % | 73.9 | % | ||||||
Workers’ Compensation: | ||||||||||||
Net Premiums Earned | $ | 387.3 | $ | 418.4 | $ | 505.6 | ||||||
Claim Ratio | 73.9 | % | 67.2 | % | 69.7 | % | ||||||
Policyholders’ Dividend Benefit | 1.0 | % | 2.2 | % | 1.2 | % | ||||||
General Liability: | ||||||||||||
Net Premiums Earned | $ | 143.2 | $ | 150.2 | $ | 168.1 | ||||||
Claim Ratio | 65.3 | % | 63.9 | % | 59.8 | % | ||||||
Three Above Coverages Combined: | ||||||||||||
Net Premiums Earned | $ | 1,183.5 | $ | 1,263.2 | $ | 1,426.2 | ||||||
Claim Ratio | 71.4 | % | 71.5 | % | 70.7 | % | ||||||
Financial Indemnity:(a) | ||||||||||||
Net Premiums Earned | $ | 241.5 | $ | 319.7 | $ | 298.0 | ||||||
Claim Ratio | 117.8 | % | 95.0 | % | 69.6 | % | ||||||
Inland Marine and Commercial Multi-Peril: | ||||||||||||
Net Premiums Earned | $ | 168.8 | $ | 192.9 | $ | 199.3 | ||||||
Claim Ratio | 61.4 | % | 58.8 | % | 54.0 | % | ||||||
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Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in Millions) | ||||||||||||
Home and Automobile Warranty: | ||||||||||||
Net Premiums Earned | $ | 141.6 | $ | 126.2 | $ | 129.8 | ||||||
Claim Ratio | 65.2 | % | 61.2 | % | 62.9 | % | ||||||
Other Coverages:(b) | ||||||||||||
Net Premiums Earned | $ | 50.7 | $ | 89.5 | $ | 98.9 | ||||||
Claim Ratio | 45.8 | % | 43.6 | % | 46.7 | % | ||||||
Mortgage Guaranty Group: | ||||||||||||
Net Premiums Earned | $ | 644.5 | $ | 592.5 | $ | 518.2 | ||||||
Claim Ratio | 176.0 | % | 199.3 | % | 118.8 | % | ||||||
Expense Ratio | 12.6 | 15.7 | 17.7 | |||||||||
Composite Ratio | 188.6 | % | 215.0 | % | 136.5 | % | ||||||
Title Insurance Group:(c) | ||||||||||||
Net Premiums Earned | $ | 611.0 | $ | 463.1 | $ | 638.5 | ||||||
Combined Net Premiums & Fees Earned | $ | 888.4 | $ | 656.1 | $ | 850.7 | ||||||
Claim Ratio | 7.9 | % | 7.0 | % | 6.6 | % | ||||||
Expense Ratio | 93.8 | 103.6 | 98.1 | |||||||||
Composite Ratio | 101.7 | % | 110.6 | % | 104.7 | % | ||||||
All Coverages Consolidated: | ||||||||||||
Net Premiums & Fees Earned | $ | 3,388.9 | $ | 3,318.1 | $ | 3,601.2 | ||||||
Claim and Benefit Ratio | 76.7 | % | 81.8 | % | 60.2 | % | ||||||
Expense Ratio | 41.8 | 39.1 | 41.3 | |||||||||
Composite Ratio | 118.5 | % | 120.9 | % | 101.5 | % | ||||||
(a) | Consists principally of fidelity, surety, consumer credit indemnity, executive indemnity (directors & officers and errors & omissions), and guaranteed asset protection (GAP) coverages. | |
(b) | Consists principally of aviation and travel accident coverages. | |
(c) | Title claim, expense, and composite ratios are calculated on the basis of combined net premiums and fees earned. |
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2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||||||||||||||||||||||||
($ in Millions) | ||||||||||||||||||||||||||||||||||||||||||||
(a) As of December 31: | ||||||||||||||||||||||||||||||||||||||||||||
(b) Liability(1) for unpaid claims and claim adjustment expenses(2): | $ | 3,229 | $ | 3,222 | $ | 3,175 | $ | 2,924 | $ | 2,414 | $ | 2,182 | $ | 1,964 | $ | 1,802 | $ | 1,678 | $ | 1,661 | $ | 1,699 | ||||||||||||||||||||||
(c) Paid (cumulative) as of(3): | ||||||||||||||||||||||||||||||||||||||||||||
One year later | — | % | 25.8 | % | 27.2 | % | 24.1 | % | 15.3 | % | 25.2 | % | 24.7 | % | 23.5 | % | 23.3 | % | 23.2 | % | 22.1 | % | ||||||||||||||||||||||
Two years later | — | — | 41.0 | 39.2 | 31.3 | 33.7 | 39.2 | 38.6 | 37.3 | 37.0 | 36.6 | |||||||||||||||||||||||||||||||||
Three years later | — | — | — | 48.7 | 42.7 | 44.3 | 44.4 | 48.4 | 47.7 | 46.0 | 45.8 | |||||||||||||||||||||||||||||||||
Four years later | — | — | — | — | 50.1 | 51.3 | 50.9 | 51.2 | 54.0 | 52.7 | 51.9 | |||||||||||||||||||||||||||||||||
Five years later | — | — | — | — | — | 56.7 | 55.9 | 55.5 | 55.2 | 57.5 | 56.8 | |||||||||||||||||||||||||||||||||
Six years later | — | — | — | — | — | — | 60.2 | 59.5 | 58.6 | 57.7 | 60.7 | |||||||||||||||||||||||||||||||||
Seven years later | — | — | — | — | — | — | — | 63.0 | 61.9 | 60.5 | 60.3 | |||||||||||||||||||||||||||||||||
Eight years later | — | — | — | — | — | — | — | — | 65.0 | 63.6 | 62.8 | |||||||||||||||||||||||||||||||||
Nine years later | — | — | — | — | — | — | — | — | — | 66.4 | 65.6 | |||||||||||||||||||||||||||||||||
Ten years later | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | 68.2 | % | ||||||||||||||||||||||
(d) Liability reestimated (i.e., cumulative payments plus reestimated ending liability) As of(4): | ||||||||||||||||||||||||||||||||||||||||||||
One year later | — | % | 98.2 | % | 97.4 | % | 96.2 | % | 95.2 | % | 97.6 | % | 97.2 | % | 98.6 | % | 99.6 | % | 97.3 | % | 96.1 | % | ||||||||||||||||||||||
Two years later | — | — | 94.9 | 94.3 | 92.3 | 94.8 | 97.0 | 98.2 | 101.3 | 98.1 | 94.9 | |||||||||||||||||||||||||||||||||
Three years later | — | — | — | 92.4 | 90.4 | 93.3 | 95.6 | 99.7 | 102.7 | 100.1 | 96.5 | |||||||||||||||||||||||||||||||||
Four years later | — | — | — | — | 88.4 | 92.2 | 95.7 | 100.4 | 105.8 | 102.2 | 98.0 | |||||||||||||||||||||||||||||||||
Five years later | — | — | — | — | — | 91.6 | 95.6 | 100.6 | 106.7 | 105.6 | 100.7 | |||||||||||||||||||||||||||||||||
Six years later | — | — | — | — | — | — | 95.5 | 101.0 | 107.3 | 106.9 | 104.2 | |||||||||||||||||||||||||||||||||
Seven years later | — | — | — | — | — | — | — | 101.0 | 107.8 | 107.5 | 105.4 | |||||||||||||||||||||||||||||||||
Eight years later | — | — | — | — | — | — | — | — | 108.0 | 108.3 | 106.1 | |||||||||||||||||||||||||||||||||
Nine years later | — | — | — | — | — | — | — | — | — | 108.5 | 106.7 | |||||||||||||||||||||||||||||||||
Ten years later | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | — | % | 107.1 | % | ||||||||||||||||||||||
(e) Redundancy (deficiency)(5) for each year-end | — | % | 1.8 | % | 5.1 | % | 7.6 | % | 11.6 | % | 8.4 | % | 4.5 | % | (1.0 | )% | (8.0 | )% | (8.5 | )% | (7.1 | )% | ||||||||||||||||||||||
Average redundancy (deficiency) for all year-ends | 2.5 | % | ||||||||||||||||||||||||||||||||||||||||||
(1) | Amounts are reported net of reinsurance. | |
(2) | Excluding unallocated loss adjustment expense reserves. | |
(3) | Percent of most recent reestimated liability (line d). Decreases in paid loss percentages may at times reflect the reassumption by the Company of certain previously ceded loss reserves from assuming reinsurers through commutations of then existing reserves. | |
(4) | Percent of beginning liability (line b) for unpaid claims and claim adjustment expenses. | |
(5) | Beginning liability less the most current liability reestimated (line d) as a percent of beginning liability (line b). |
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Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||||||||||||||||||||||||
($ in Millions) | ||||||||||||||||||||||||||||||||||||||||||||
(a) Beginning net reserves | $ | 3,222 | $ | 3,175 | $ | 2,924 | $ | 2,414 | $ | 2,182 | $ | 1,964 | $ | 1,802 | $ | 1,678 | $ | 1,661 | $ | 1,699 | $ | 1,742 | ||||||||||||||||||||||
Incurred claims and claim expenses: | ||||||||||||||||||||||||||||||||||||||||||||
(b) Current year provision | 1,343 | 1,452 | 1,490 | 1,295 | 1,191 | 1,070 | 893 | 814 | 749 | 690 | 734 | |||||||||||||||||||||||||||||||||
(c) Change in prior years’ provision | (56 | ) | (83 | ) | (110 | ) | (116 | ) | (52 | ) | (55 | ) | (25 | ) | (7 | ) | (44 | ) | (66 | ) | (66 | ) | ||||||||||||||||||||||
(d) Total incurred | 1,287 | 1,369 | 1,379 | 1,179 | 1,138 | 1,014 | 868 | 807 | 704 | 623 | 668 | |||||||||||||||||||||||||||||||||
Claim payments on: | ||||||||||||||||||||||||||||||||||||||||||||
(e) Current years’ events | 460 | 502 | 476 | 342 | 402 | 332 | 277 | 260 | 269 | 258 | 298 | |||||||||||||||||||||||||||||||||
(f) Prior years’ events | 818 | 820 | 652 | 326 | 504 | 463 | 428 | 423 | 418 | 402 | 412 | |||||||||||||||||||||||||||||||||
(g) Total payments | 1,279 | 1,323 | 1,128 | 668 | 907 | 796 | 706 | 683 | 687 | 661 | 710 | |||||||||||||||||||||||||||||||||
(h) Ending net reserves (a + d − g) | 3,229 | 3,222 | 3,175 | 2,924 | 2,414 | 2,182 | 1,964 | 1,802 | 1,678 | 1,661 | 1,699 | |||||||||||||||||||||||||||||||||
(i) Unallocated loss adjustment expense reserves | 104 | 104 | 103 | 97 | 92 | 87 | 83 | 78 | 76 | 73 | 71 | |||||||||||||||||||||||||||||||||
(j) Reinsurance recoverable on claims reserves | 2,046 | 2,020 | 1,976 | 1,929 | 1,894 | 1,632 | 1,515 | 1,363 | 1,261 | 1,235 | 1,238 | |||||||||||||||||||||||||||||||||
(k) Gross claims reserves (h + i + j) | $ | 5,380 | $ | 5,346 | $ | 5,256 | $ | 4,951 | $ | 4,401 | $ | 3,902 | $ | 3,562 | $ | 3,244 | $ | 3,016 | $ | 2,969 | $ | 3,009 | ||||||||||||||||||||||
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December 31, | ||||||||
2009 | 2008 | |||||||
($ in Millions) | ||||||||
Available for Sale | ||||||||
Fixed Maturity Securities: | ||||||||
U.S. & Canadian Governments | $ | 974.0 | $ | 694.4 | ||||
Tax-Exempt | 2,344.0 | 2,365.7 | ||||||
Corporate | 5,008.7 | 4,346.7 | ||||||
8,326.8 | 7,406.9 | |||||||
Equity Securities | 502.9 | 350.3 | ||||||
Short-term Investments | 826.7 | 888.0 | ||||||
Miscellaneous Investments | 24.0 | 29.7 | ||||||
Total available for sale | 9,680.5 | 8,675.0 | ||||||
Other Investments | 7.8 | 7.8 | ||||||
Total Investments | $ | 9,688.4 | $ | 8,682.9 | ||||
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in Millions) | ||||||||||||
Fixed Maturity Securities: | ||||||||||||
Taxable Interest | $ | 285.5 | $ | 259.1 | $ | 247.7 | ||||||
Tax-Exempt Interest | 83.0 | 86.1 | 85.2 | |||||||||
368.6 | 345.2 | 332.9 | ||||||||||
Equity Securities Dividends | 7.4 | 13.3 | 16.1 | |||||||||
Other Investment Income: | ||||||||||||
Interest on Short-term Investments | 5.4 | 16.5 | 28.2 | |||||||||
Sundry | 4.9 | 5.6 | 6.4 | |||||||||
10.4 | 22.1 | 34.6 | ||||||||||
Gross Investment Income | 386.5 | 380.8 | 383.8 | |||||||||
Less: Investment Expenses(a) | 3.0 | 3.4 | 3.8 | |||||||||
Net Investment Income | $ | 383.5 | $ | 377.3 | $ | 379.9 | ||||||
(a) | Investment expenses consist primarily of personnel costs, investment management and custody service fees, and interest incurred on funds held of $.1 million, $.6 million, and $1.1 million for the years ended December 31, 2009, 2008, and 2007 respectively. |
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December 31, | ||||||||
2009 | 2008 | |||||||
(% of total portfolio) | ||||||||
Aaa | 22.3 | % | 20.4 | % | ||||
Aa | 20.3 | 24.5 | ||||||
A | 30.3 | 31.4 | ||||||
Baa | 25.7 | 22.0 | ||||||
Total investment grade | 98.6 | 98.3 | ||||||
All other(c) | 1.4 | 1.7 | ||||||
Total | 100.0 | % | 100.0 | % | ||||
(b) | Credit quality ratings used are those assigned primarily by Moody’s for U.S. Governments, Agencies and Corporate issuers and by Standard & Poor’s (“S&P”) for U.S. and Canadian Municipal issuers, which are converted to equivalent Moody’s ratings classifications. In the second quarter of 2009, Old Republic changed its source of credit quality ratings from Moody’s to S&P for U.S. Municipal issuers due to their wider credit coverage. The December 31, 2008 disclosures have been restated to be comparable to the current period classifications. The effect of such change moderately improved the previously reported credit quality ratings. | |
(c) | “All other” includes non investment grade or non rated issuers. |
December 31, | ||||||||
2009 | 2008 | |||||||
(% of total portfolio) | ||||||||
Maturity Ranges: | ||||||||
Due in one year or less | 9.3 | % | 14.0 | % | ||||
Due after one year through five years | 55.0 | 51.0 | ||||||
Due after five years through ten years | 34.9 | 34.7 | ||||||
Due after ten years through fifteen years | .8 | .3 | ||||||
Due after fifteen years | — | — | ||||||
100.0 | % | 100.0 | % | |||||
Average Maturity in Years | 4.4 | 4.4 | ||||||
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2009 | 2008 | 2007 | ||||||||||
United States: | ||||||||||||
Northeast | 9.0 | % | 9.4 | % | 10.1 | % | ||||||
Mid-Atlantic | 7.7 | 7.3 | 8.6 | |||||||||
Southeast | 19.6 | 20.0 | 20.6 | |||||||||
Southwest | 12.6 | 12.7 | 12.2 | |||||||||
East North Central | 12.9 | 12.9 | 12.3 | |||||||||
West North Central | 12.9 | 13.5 | 12.4 | |||||||||
Mountain | 8.8 | 8.3 | 8.2 | |||||||||
Western | 13.8 | 13.4 | 13.0 | |||||||||
Foreign (Principally Canada) | 2.7 | 2.5 | 2.6 | |||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
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Reinsurance | % of Total | |||||||||||||||||
A.M. | Recoverable | Total | Consolidated | |||||||||||||||
Best | On Paid | On Claims | Exposure to | Reinsured | ||||||||||||||
Reinsurer | Rating | Claims | Reserves | Reinsurer | Liabilities | |||||||||||||
($ in Millions) | ||||||||||||||||||
Munich Reinsurance America, Inc. | A+ | $ | 10.1 | $ | 664.5 | $ | 674.7 | 28.3 | % | |||||||||
Swiss Reinsurance America Corporation | A | 3.4 | 179.1 | 182.5 | 7.7 | |||||||||||||
National WC Reinsurance Pool | unrated | 3.2 | 102.5 | 105.8 | 4.4 | |||||||||||||
General Reinsurance Corporation | A++ | 1.8 | 83.7 | 85.5 | 3.6 | |||||||||||||
Muenchener Ruckversicherungs | A+ | 3.9 | 79.0 | 83.0 | 3.5 | |||||||||||||
School Boards Insurance Co of PA, Inc. | A− | 1.0 | 63.9 | 65.0 | 2.7 | |||||||||||||
Westport Insurance Corporation | A | .5 | 59.5 | 60.0 | 2.5 | |||||||||||||
Kentucky Workers’ Compensation Reins Pool for Coal Miners Risks | unrated | 2.0 | 53.3 | 55.3 | 2.3 | |||||||||||||
Transatlantic Reinsurance Company | A | (.1 | ) | 46.5 | 46.3 | 1.9 | ||||||||||||
Hannover Ruckversicherungs | A | .3 | 44.5 | 44.8 | 1.9 | |||||||||||||
Total | $ | 26.4 | $ | 1,376.9 | $ | 1,403.3 | 58.9 | % | ||||||||||
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March 31, | December 31, | |||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
($ in millions, except share data) | ||||||||||||||||||||||||||||
FINANCIAL POSITION: | ||||||||||||||||||||||||||||
Cash and Invested Assets(a) | $ | 9,985.9 | $ | 9,052.4 | $ | 9,879.0 | $ | 8,855.1 | $ | 8,924.0 | $ | 8,230.8 | $ | 7,394.1 | ||||||||||||||
Other Assets | 4,254.9 | 4,241.1 | 4,310.9 | 4,410.9 | 4,366.5 | 4,381.4 | 4,149.0 | |||||||||||||||||||||
Total Assets | $ | 14,240.9 | $ | 13,293.5 | $ | 14,190.0 | $ | 13,266.0 | $ | 13,290.6 | $ | 12,612.2 | $ | 11,543.2 | ||||||||||||||
Liabilities, Other than Debt | $ | 9,897.8 | $ | 9,429.0 | $ | 9,951.8 | $ | 9,292.6 | $ | 8,684.9 | $ | 8,098.6 | $ | 7,376.4 | ||||||||||||||
Debt | 347.2 | 221.1 | 346.7 | 233.0 | 64.1 | 144.3 | 142.7 | |||||||||||||||||||||
Total Liabilities | 10,245.0 | 9,650.2 | 10,298.6 | 9,525.7 | 8,749.0 | 8,243.0 | 7,519.1 | |||||||||||||||||||||
Preferred Stock | — | — | — | — | — | — | — | |||||||||||||||||||||
Common Shareholders’ Equity | 3,995.8 | 3,643.2 | 3,891.4 | 3,740.3 | 4,541.6 | 4,369.2 | 4,024.0 | |||||||||||||||||||||
Total Liabilities and Shareholders’ Equity | $ | 14,240.9 | $ | 13,293.5 | $ | 14,190.0 | $ | 13,266.0 | $ | 13,290.6 | $ | 12,612.2 | $ | 11,543.2 | ||||||||||||||
Total Capitalization(b) | $ | 4,343.1 | $ | 3,864.4 | $ | 4,238.2 | $ | 3,973.4 | $ | 4,605.7 | $ | 4,513.5 | $ | 4,166.7 | ||||||||||||||
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Quarters Ended March 31, | Years Ended December 31, | |||||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
RESULTS OF OPERATIONS: | ||||||||||||||||||||||||||||
Net Premiums and Fees Earned | $ | 828.5 | $ | 777.4 | $ | 3,388.9 | $ | 3,318.1 | $ | 3,601.2 | $ | 3,400.5 | $ | 3,386.9 | ||||||||||||||
Net Investment and Other Income | 101.0 | 101.0 | 408.3 | 406.0 | 419.3 | 374.6 | 354.0 | |||||||||||||||||||||
Realized Investment Gains (Losses) | 2.9 | — | 6.3 | (486.4 | ) | 70.3 | 19.0 | 64.9 | ||||||||||||||||||||
Net Revenues | 932.6 | 878.5 | 3,803.6 | 3,237.7 | 4,091.0 | 3,794.2 | 3,805.9 | |||||||||||||||||||||
Benefits, Claims, and | ||||||||||||||||||||||||||||
Settlement Expenses | 494.1 | 652.0 | 2,598.9 | 2,715.7 | 2,166.2 | 1,539.6 | 1,465.4 | |||||||||||||||||||||
Underwriting and Other Expenses | 407.1 | 319.3 | 1,478.3 | 1,341.2 | 1,546.3 | 1,574.3 | 1,593.0 | |||||||||||||||||||||
Pretax Income (Loss) | 31.2 | (92.7 | ) | (273.6 | ) | (819.2 | ) | 378.4 | 680.1 | 747.3 | ||||||||||||||||||
Income Taxes (Credits) | 6.2 | (38.8 | ) | (174.4 | ) | (260.8 | ) | 105.9 | 215.2 | 195.9 | ||||||||||||||||||
Net Income (Loss) | $ | 25.0 | $ | (53.9 | ) | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | $ | 464.8 | $ | 551.4 | |||||||||||
COMMON SHARE DATA:(c) | ||||||||||||||||||||||||||||
Net Income (Loss): | ||||||||||||||||||||||||||||
Basic | $ | .11 | $ | (0.23 | ) | $ | (.42 | ) | $ | (2.41 | ) | $ | 1.18 | $ | 2.01 | $ | 2.40 | |||||||||||
Diluted | $ | .11 | $ | (0.23 | ) | $ | (.42 | ) | $ | (2.41 | ) | $ | 1.17 | $ | 1.99 | $ | 2.37 | |||||||||||
Dividends: | ||||||||||||||||||||||||||||
Cash — Regular | $ | .1725 | $ | $.1700 | $ | .6800 | $ | .6700 | $ | .6300 | $ | .5900 | $ | .5120 | ||||||||||||||
— Special | — | — | — | — | — | — | .8000 | |||||||||||||||||||||
— Total | $ | .1725 | $ | .1700 | $ | .6800 | $ | .6700 | $ | .6300 | $ | .5900 | $ | 1.3120 | ||||||||||||||
Stock | — | % | — | % | — | % | — | % | — | % | — | % | 25 | % | ||||||||||||||
Book Value | $ | 16.90 | $ | 15.47 | $ | 16.49 | $ | 15.91 | $ | 19.71 | $ | 18.91 | $ | 17.53 | ||||||||||||||
Common Shares (thousands): | ||||||||||||||||||||||||||||
Outstanding | 236,466 | 235,485 | 235,995 | 235,031 | 230,472 | 231,047 | 229,575 | |||||||||||||||||||||
Average: | ||||||||||||||||||||||||||||
Basic | 236,387 | 235,259 | 235,657 | 231,484 | 231,370 | 231,017 | 229,487 | |||||||||||||||||||||
Diluted | 236,462 | 235,259 | 235,657 | 231,484 | 232,912 | 233,034 | 232,108 | |||||||||||||||||||||
(a) | Consists of cash, investments and accrued investment income. | |
(b) | Total capitalization consists of debt, preferred stock, and common shareholders’ equity. | |
(c) | All per share statistics herein have been restated to reflect all stock dividends or splits declared through March 31, 2010. |
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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
($ in Millions, Except Share Data)
A. | Quarters Ended March 31, 2010 and 2009 |
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Quarters Ended March 31, | ||||||||||||
2010 | 2009 | Change | ||||||||||
Operating revenues: | ||||||||||||
General insurance | $ | 479.1 | $ | 523.7 | (8.5 | )% | ||||||
Mortgage guaranty | 160.5 | 171.2 | (6.3 | ) | ||||||||
Title insurance | 262.0 | 160.2 | 63.5 | |||||||||
Corporate and other | 27.8 | 23.2 | 19.8 | |||||||||
Total | $ | 929.6 | $ | 878.5 | 5.8 | % | ||||||
Pretax operating income (loss): | ||||||||||||
General insurance | $ | 69.2 | $ | 58.2 | 19.0 | % | ||||||
Mortgage guaranty | (34.1 | ) | (144.6 | ) | 76.4 | |||||||
Title insurance | (8.6 | ) | (9.0 | ) | 4.3 | |||||||
Corporate and other | 1.8 | 2.6 | (31.4 | ) | ||||||||
Sub-total | 28.3 | (92.8 | ) | 130.5 | ||||||||
Realized investment gains (losses): | ||||||||||||
From sales | 2.9 | — | ||||||||||
From impairments | — | — | ||||||||||
Net realized investment gains (losses) | 2.9 | — | N/M | |||||||||
Consolidated pretax income (loss) | 31.2 | (92.7 | ) | 133.7 | ||||||||
Income taxes (credits) | 6.2 | (38.8 | ) | 116.0 | ||||||||
Net income (loss) | $ | 25.0 | $ | (53.9 | ) | 146.5 | % | |||||
Consolidated underwriting ratio: | ||||||||||||
Benefits and claim ratio | 59.6 | % | 83.9 | % | ||||||||
Expense ratio | 47.4 | 39.6 | ||||||||||
Composite ratio | 107.0 | % | 123.5 | % | ||||||||
Components of diluted earnings per share: | ||||||||||||
Net operating income (loss) | $ | 0.10 | $ | (0.23 | ) | 143.5 | % | |||||
Net realized investment gains (losses) | 0.01 | — | ||||||||||
Net income (loss) | $ | 0.11 | $ | (0.23 | ) | 147.8 | % | |||||
Cash dividends paid per share | $ | 0.1725 | $ | 0.1700 | 1.5 | % | ||||||
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General Insurance Group | ||||||||||||
Quarters Ended March 31, | ||||||||||||
2010 | 2009 | Change | ||||||||||
Net premiums earned | $ | 411.8 | $ | 457.3 | (10.0 | )% | ||||||
Net investment income | 64.6 | 63.4 | 1.8 | |||||||||
Pretax operating income (loss) | $ | 69.2 | $ | 58.2 | 19.0 | % | ||||||
Claim ratio | 70.6 | % | 74.8 | % | ||||||||
Expense ratio | 26.7 | 25.6 | ||||||||||
Composite ratio | 97.3 | % | 100.4 | % | ||||||||
Mortgage Guaranty Group | ||||||||||||
Quarters Ended March 31, | ||||||||||||
2010 | 2009 | Change | ||||||||||
Net premiums earned | $ | 136.2 | $ | 145.3 | (6.2 | )% | ||||||
Net investment income | 23.1 | 22.4 | 3.1 | |||||||||
Pretax operating income (loss) | $ | (34.1 | ) | $ | (144.6 | ) | 76.4 | % | ||||
Claim ratio | 127.2 | % | 199.9 | % | ||||||||
Expense ratio | 13.5 | 13.7 | ||||||||||
Composite ratio | 140.7 | % | 213.6 | % | ||||||||
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Mortgage Guaranty Group | ||||||||
Quarters Ended March 31, | ||||||||
2010 | 2009 | |||||||
Components of incurred claim ratio as a percent of earned premiums: | ||||||||
Paid claims: | ||||||||
Payments, excluding pool terminations | 107.6 | % | 107.1 | % | ||||
Pool terminations reserve payments | 128.8 | — | ||||||
Total paid claim ratio | 236.5 | 107.1 | ||||||
Claim reserve provisions: | ||||||||
Excluding pool terminations | 47.0 | 92.8 | ||||||
Pool termination reserves released | (151.1 | ) | — | |||||
Net claim reserve provisions (release) | (104.2 | ) | 92.8 | |||||
Effect of captive commutations | (5.1 | ) | — | |||||
Incurred claim ratio | 127.2 | % | 199.9 | % | ||||
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Title Insurance Group | ||||||||||||
Quarters Ended March 31, | ||||||||||||
2010 | 2009 | Change | ||||||||||
Net premiums and fees earned | $ | 255.2 | $ | 154.3 | 65.4 | % | ||||||
Net investment income | 6.6 | 5.8 | 12.8 | |||||||||
Pretax operating income (loss) | $ | (8.6 | ) | $ | (9.0 | ) | 4.3 | % | ||||
Claim ratio | 7.4 | % | 6.6 | % | ||||||||
Expense ratio | 98.5 | 102.9 | ||||||||||
Composite ratio | 105.9 | % | 109.5 | % | ||||||||
% Change | ||||||||||||||||||||
March 31, | December 31, | March 31, | March ’10/ | March ’10/ | ||||||||||||||||
2010 | 2009 | 2009 | Dec ’09 | March ’09 | ||||||||||||||||
Cash and invested assets: | ||||||||||||||||||||
Fair value basis | $ | 9,985.9 | $ | 9,879.0 | $ | 9,052.4 | 1.1 | % | 10.3 | % | ||||||||||
Original cost basis | $ | 9,561.2 | $ | 9,625.9 | $ | 9,407.1 | (.7 | )% | 1.6 | % | ||||||||||
Shareholders’ equity: | ||||||||||||||||||||
Total | $ | 3,995.8 | $ | 3,891.4 | $ | 3,643.2 | 2.7 | % | 9.7 | % | ||||||||||
Per common share | $ | 16.90 | $ | 16.49 | $ | 15.47 | 2.5 | % | 9.2 | % | ||||||||||
Composition of shareholders’ equity per share: | ||||||||||||||||||||
Equity before items below | $ | 14.92 | $ | 14.99 | $ | 15.69 | (0.5 | )% | (4.9 | )% | ||||||||||
Unrealized investment gains (losses) and other accumulated comprehensive income (loss) | 1.98 | 1.50 | (0.22 | ) | ||||||||||||||||
Total | $ | 16.90 | $ | 16.49 | $ | 15.47 | 2.5 | % | 9.2 | % | ||||||||||
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As of and for Periods Ended: | ||||||||||||
March 31, | December 31, | |||||||||||
2010 | 2009 | 2008 | ||||||||||
Total value of the two MI investments: | ||||||||||||
Original cost | $ | 416.4 | $ | 416.4 | $ | 416.4 | ||||||
Impaired cost | 106.8 | 106.8 | 106.8 | |||||||||
Fair value | 254.0 | 130.7 | 82.7 | |||||||||
Underlying equity(*) | $ | 235.6 | $ | 274.6 | $ | 515.9 | ||||||
Pretaxother-than-temporary impairments recorded in income statement of the period | $ | — | $ | — | $ | (375.5 | ) | |||||
Pretax unrealized investment gains (losses) recorded directly in shareholders’ equity account: | ||||||||||||
For the period | $ | 123.3 | $ | 48.0 | $ | (24.1 | ) | |||||
Cumulatively | $ | 147.2 | $ | 23.9 | $ | (24.1 | ) | |||||
(*) | Underlying equity based on latest reports (which may lag by one quarter) issued by investees. |
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Shareholders’ Equity per Share | ||||||||
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
Beginning balance | $ | 16.49 | $ | 15.91 | ||||
Changes in shareholders’ equity: | ||||||||
Net operating income (loss) | 0.10 | (0.23 | ) | |||||
Net realized investment gains (losses): | ||||||||
From sales | 0.01 | — | ||||||
From impairments | — | — | ||||||
Subtotal | 0.01 | — | ||||||
Net unrealized investment gains (losses) | 0.47 | (0.04 | ) | |||||
Total realized and unrealized investment gains (losses) | 0.48 | (0.04 | ) | |||||
Cash dividends | (0.17 | ) | (0.17 | ) | ||||
Stock issuance, foreign exchange, and other transactions | — | — | ||||||
Net change | 0.41 | (0.44 | ) | |||||
Ending balance | $ | 16.90 | $ | 15.47 | ||||
B. | Years Ended December 31, 2009, 2008 and 2007 |
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% Change | ||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||
Years Ended December 31, | 2009 | 2008 | 2007 | vs. 2008 | vs. 2007 | |||||||||||||||
Operating revenues: | ||||||||||||||||||||
General insurance | $ | 2,052.7 | $ | 2,255.9 | $ | 2,438.0 | (9.0 | )% | (7.5 | )% | ||||||||||
Mortgage guaranty | 746.1 | 690.0 | 608.3 | 8.1 | 13.4 | |||||||||||||||
Title insurance | 914.1 | 681.3 | 878.5 | 34.2 | (22.4 | ) | ||||||||||||||
Corporate and other | 84.3 | 96.8 | 95.6 | (12.9 | ) | 1.3 | ||||||||||||||
Total | $ | 3,797.2 | $ | 3,724.2 | $ | 4,020.6 | 2.0 | % | (7.4 | )% | ||||||||||
Pretax operating income (loss): | ||||||||||||||||||||
General insurance | $ | 200.1 | $ | 294.3 | $ | 418.0 | (32.0 | )% | (29.6 | )% | ||||||||||
Mortgage guaranty | (486.4 | ) | (594.3 | ) | (110.4 | ) | 18.2 | (438.1 | ) | |||||||||||
Title insurance | 2.1 | (46.3 | ) | (14.7 | ) | 104.7 | (214.7 | ) | ||||||||||||
Corporate and other | 4.0 | 13.5 | 15.1 | (70.1 | ) | (10.6 | ) | |||||||||||||
Sub-total | (279.9 | ) | (332.7 | ) | 308.0 | 15.9 | (208.0 | ) | ||||||||||||
Realized investment gains (losses): | ||||||||||||||||||||
From sales | 15.9 | (4.1 | ) | 70.3 | ||||||||||||||||
From impairments | (9.5 | ) | (482.3 | ) | — | |||||||||||||||
Net realized investment gains (losses) | 6.3 | (486.4 | ) | 70.3 | 101.3 | N/M | ||||||||||||||
Consolidated pretax income (loss) | (273.6 | ) | (819.2 | ) | 378.4 | 66.6 | (316.5 | ) | ||||||||||||
Income taxes (credits) | (174.4 | ) | (260.8 | ) | 105.9 | 33.1 | (346.2 | ) | ||||||||||||
Net income (loss) | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | 82.2 | % | (304.9 | )% | ||||||||
Consolidated underwriting ratio: | ||||||||||||||||||||
Benefits and claim ratio | 76.7 | % | 81.8 | % | 60.2 | % | (6.2 | )% | 35.9 | % | ||||||||||
Expense ratio | 41.8 | 39.1 | 41.3 | 6.9 | (5.3 | ) | ||||||||||||||
Composite ratio | 118.5 | % | 120.9 | % | 101.5 | % | (2.0 | )% | 19.1 | % | ||||||||||
Components of diluted earnings per share: | ||||||||||||||||||||
Net operating income (loss) | $ | (0.67 | ) | $ | (0.81 | ) | $ | 0.97 | 17.3 | % | (183.5 | )% | ||||||||
Net realized investment gains (losses) | 0.25 | (1.60 | ) | 0.20 | ||||||||||||||||
Net income (loss) | $ | (0.42 | ) | $ | (2.41 | ) | $ | 1.17 | 82.6 | % | (306.0 | )% | ||||||||
Cash dividends paid per share | $ | 0.68 | $ | 0.67 | $ | 0.63 | 1.5 | % | 6.3 | % | ||||||||||
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General Insurance Group | ||||||||||||||||||||
% Change | ||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||
Years Ended December 31, | 2009 | 2008 | 2007 | vs. 2008 | vs. 2007 | |||||||||||||||
Net premiums earned | $ | 1,782.5 | $ | 1,989.3 | $ | 2,155.1 | (10.4 | )% | (7.7 | )% | ||||||||||
Net investment income | 258.9 | 253.6 | 260.8 | 2.1 | (2.8 | ) | ||||||||||||||
Pretax operating income (loss) | $ | 200.1 | $ | 294.3 | $ | 418.0 | (32.0 | )% | (29.6 | )% | ||||||||||
Claim ratio | 76.3 | % | 73.0 | % | 67.8 | % | 4.5 | % | 7.7 | % | ||||||||||
Expense ratio | 25.8 | 24.2 | 24.1 | 6.6 | .4 | |||||||||||||||
Composite ratio | 102.1 | % | 97.2 | % | 91.9 | % | 5.0 | % | 5.8 | % | ||||||||||
Mortgage Guaranty Group | ||||||||||||||||||||
% Change | ||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||
Years Ended December 31, | 2009 | 2008 | 2007 | vs. 2008 | vs. 2007 | |||||||||||||||
Net premiums earned | $ | 644.5 | $ | 592.5 | $ | 518.2 | 8.8 | % | 14.3 | % | ||||||||||
Net investment income | 92.0 | 86.8 | 79.0 | 5.9 | 10.0 | |||||||||||||||
Pretax operating income (loss) | $ | (486.4 | ) | $ | (594.3 | ) | $ | (110.4 | ) | 18.2 | % | (438.1 | )% | |||||||
Claim ratio | 176.0 | % | 199.3 | % | 118.8 | % | (11.7 | )% | 67.8 | % | ||||||||||
Expense ratio | 12.6 | 15.7 | 17.7 | (19.7 | ) | (11.3 | ) | |||||||||||||
Composite ratio | 188.6 | % | 215.0 | % | 136.5 | % | (12.3 | )% | 57.5 | % | ||||||||||
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Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Incurred claim ratio from: | ||||||||||||
Paid claims | 97.0 | % | 74.8 | % | 42.5 | % | ||||||
Claim reserve provisions | 102.6 | 124.5 | 76.3 | |||||||||
Effect of commutations | (23.6 | ) | — | — | ||||||||
Total | 176.0 | % | 199.3 | % | 118.8 | % | ||||||
Title Insurance Group | ||||||||||||||||||||
% Change | ||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||
Years Ended December 31, | 2009 | 2008 | 2007 | vs. 2008 | vs. 2007 | |||||||||||||||
Net premiums and fees earned | $ | 888.4 | $ | 656.1 | $ | 850.7 | 35.4 | % | (22.9 | )% | ||||||||||
Net investment income | 25.2 | 25.1 | 27.3 | 0.2 | (7.9 | ) | ||||||||||||||
Pretax operating income (loss) | $ | 2.1 | $ | (46.3 | ) | $ | (14.7 | ) | 104.7 | % | (214.7 | )% | ||||||||
Claim ratio | 7.9 | % | 7.0 | % | 6.6 | % | 12.9 | % | 6.1 | % | ||||||||||
Expense ratio | 93.8 | 103.6 | 98.1 | (9.5 | ) | 5.6 | ||||||||||||||
Composite ratio | 101.7 | % | 110.6 | % | 104.7 | % | (8.0 | )% | 5.6 | % | ||||||||||
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% Change | ||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||
As of December 31: | 2009 | 2008 | 2007 | vs. 2008 | vs. 2007 | |||||||||||||||
Cash and invested assets: | ||||||||||||||||||||
Fair value basis | $ | 9,879.0 | $ | 8,855.1 | $ | 8,924.0 | 11.6 | % | (.8 | )% | ||||||||||
Original cost basis | $ | 9,625.9 | $ | 9,210.0 | $ | 8,802.5 | 4.5 | % | 4.6 | % | ||||||||||
Shareholders’ equity: | ||||||||||||||||||||
Total | $ | 3,891.4 | $ | 3,740.3 | $ | 4,541.6 | 4.0 | % | (17.6 | )% | ||||||||||
Per common share | $ | 16.49 | $ | 15.91 | $ | 19.71 | 3.6 | % | (19.3 | )% | ||||||||||
Composition of shareholders’ equity per share: | ||||||||||||||||||||
Equity before items below | $ | 14.99 | $ | 16.10 | $ | 19.31 | (6.9 | )% | (16.6 | )% | ||||||||||
Unrealized investment gains (losses) and other | ||||||||||||||||||||
accumulated comprehensive income (loss) | 1.50 | (0.19 | ) | 0.40 | ||||||||||||||||
Total | $ | 16.49 | $ | 15.91 | $ | 19.71 | 3.6 | % | (19.3 | )% | ||||||||||
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Shareholders’ Equity per Share | ||||||||||||
Years Ended December 31, | 2009 | 2008 | 2007 | |||||||||
Beginning book value per share | $ | 15.91 | $ | 19.71 | $ | 18.91 | ||||||
Changes in shareholders’ equity for the periods: | ||||||||||||
Net operating income (loss) | (.67 | ) | (.81 | ) | .98 | |||||||
Net realized investment gains (losses): | ||||||||||||
From sales | .04 | (.01 | ) | .20 | ||||||||
From impairments | .21 | (1.59 | ) | — | ||||||||
Subtotal | .25 | (1.60 | ) | .20 | ||||||||
Net unrealized investment gains (losses) | 1.59 | (.33 | ) | .05 | ||||||||
Total realized and unrealized investment gains (losses) | 1.84 | (1.93 | ) | .25 | ||||||||
Cash dividends | (.68 | ) | (.67 | ) | (.63 | ) | ||||||
Stock issuance, foreign exchange, and other transactions | .09 | (.39 | ) | .20 | ||||||||
Net change | .58 | (3.80 | ) | .80 | ||||||||
Ending book value per share | $ | 16.49 | $ | 15.91 | $ | 19.71 | ||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Total value of the two MI investments: | ||||||||||||
Original cost | $ | 416.4 | $ | 416.4 | $ | 429.7 | ||||||
Impaired cost | 106.8 | 106.8 | N/A | |||||||||
Fair value | 130.7 | 82.7 | 375.1 | |||||||||
Underlying equity(*) | $ | 274.6 | $ | 515.9 | $ | 679.7 | ||||||
(*) | Underlying equity based on latest reports (which may lag by one quarter) issued by investees. |
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(a) | Other-than-temporary impairments in the value of investments: |
(b) | Establishment of deferred acquisition costs (“DAC”) |
(c) | The recoverability of reinsured paid and/or outstanding losses |
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(d) | The reserves for losses and loss adjustment expenses |
• | The establishment of expected loss ratios for the three latest accident years, particularly for so-called long-tail coverages as to which information about covered losses emerges and becomes more accurately quantified over long periods of time. Long-tail lines of business generally include workers’ compensation, auto liability, general liability, errors and omissions and directors and officers’ liability, and title insurance. Gross loss reserves related to such long-tail coverages ranged between 66.0% and 79.1%, and averaged 72.0% of gross consolidated claim reserves as of the three most recent year ends. Net of reinsurance recoverables, such reserves ranged between 60.1% and 75.4% and averaged 67.3% as of the same dates. | |
• | Loss trend factors that are used to establish the above noted expected loss ratios. These factors take into account such variables as judgments and estimates relative to premium rate trends and adequacy, current and expected interest rates, current and expected social and economic inflation trends, and insurance industry statistical claim trends. | |
• | Loss development factors, expected claim rates and average claim costs all of which are based on Companyand/or industry statistics used to project reported and unreported losses for each accounting period. |
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A. | Quarters Ended March 31, 2010 and 2009 |
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March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Aaa | 21.8 | % | 22.3 | % | ||||
Aa | 20.2 | 20.3 | ||||||
A | 30.6 | 30.3 | ||||||
Baa | 26.2 | 25.7 | ||||||
Total investment grade | 98.8 | 98.6 | ||||||
All other(b) | 1.2 | 1.4 | ||||||
Total | 100.0 | % | 100.0 | % | ||||
(a) | Credit quality ratings used are those assigned primarily by Moody’s for U.S. Governments, Agencies and Corporate issuers and by Standard & Poor’s (“S&P”) for U.S. and Canadian Municipal issuers, which are converted to equivalent Moody’s ratings classifications. | |
(b) | “All other” includes non-investment grade or non-rated issuers. |
March 31, 2010 | ||||||||
Gross | ||||||||
Amortized | Unrealized | |||||||
Cost | Losses | |||||||
Fixed Maturity Securities by Industry Concentration: | ||||||||
Banking | $ | 23.0 | $ | 1.4 | ||||
Industrial | 6.5 | .5 | ||||||
Retail | 4.1 | .2 | ||||||
Total | $ | 33.7 | (c) | $ | 2.2 | |||
(c) | Represents .4% of the total fixed maturity securities portfolio. |
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March 31, 2010 | ||||||||
Gross | ||||||||
Amortized | Unrealized | |||||||
Cost | Losses | |||||||
Fixed Maturity Securities by Industry Concentration: | ||||||||
Energy | $ | 33.5 | $ | 1.1 | ||||
Industrial | 69.8 | 1.0 | ||||||
Utilities | 56.5 | .7 | ||||||
Banking | 15.9 | .6 | ||||||
Other (includes 13 industry groups) | 282.8 | 1.8 | ||||||
Total | $ | 458.7 | (d) | $ | 5.5 | |||
(d) | Represents 5.8% of the total fixed maturity securities portfolio. |
March 31, 2010 | ||||||||
Gross | ||||||||
Unrealized | ||||||||
Cost | Losses | |||||||
Equity Securities by Industry Concentration: | ||||||||
Index Funds | $ | 112.8 | $ | 7.9 | ||||
Health Care | 15.1 | .2 | ||||||
Natural Gas | .3 | — | ||||||
Insurance | .2 | — | ||||||
Total | $ | 128.5 | (e) | $ | 8.2 | (f) | ||
(e) | Represents 35.8% of the total equity securities portfolio. |
(f) | Represents 2.3% of the adjusted cost of the total equity securities portfolio, while gross unrealized gains represent 78.4% of the portfolio. |
March 31, 2010 | ||||||||||||||||
Amortized Cost | Gross | |||||||||||||||
of Fixed Maturity Securities | Unrealized Losses | |||||||||||||||
Non- | Non- | |||||||||||||||
Investment | Investment | |||||||||||||||
All | Grade Only | All | Grade Only | |||||||||||||
Maturity Ranges: | ||||||||||||||||
Due in one year or less | $ | — | $ | — | $ | — | $ | — | ||||||||
Due after one year through five years | 94.4 | 13.4 | 1.3 | 1.0 | ||||||||||||
Due after five years through ten years | 355.3 | 20.3 | 4.8 | 1.1 | ||||||||||||
Due after ten years | 42.7 | — | 1.5 | — | ||||||||||||
Total | $ | 492.5 | $ | 33.7 | $ | 7.7 | $ | 2.2 | ||||||||
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March 31, 2010 | ||||||||||||||||
Amount of Gross Unrealized Losses | ||||||||||||||||
Less Than | Total Gross | |||||||||||||||
20% of | 20% to 50% | More Than | Unrealized | |||||||||||||
Cost | of Cost | 50% of Cost | Loss | |||||||||||||
Number of Months in Loss Position: | ||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||
One to six months | $ | 4.6 | $ | — | $ | — | $ | 4.6 | ||||||||
Seven to twelve months | .1 | — | — | .1 | ||||||||||||
More than twelve months | 2.5 | .3 | — | 2.9 | ||||||||||||
Total | $ | 7.3 | $ | .3 | $ | — | $ | 7.7 | ||||||||
Equity Securities: | ||||||||||||||||
One to six months | $ | .3 | $ | — | $ | — | $ | .3 | ||||||||
Seven to twelve months | — | — | — | — | ||||||||||||
More than twelve months | 7.8 | — | — | 7.9 | ||||||||||||
Total | $ | 8.1 | $ | — | $ | — | $ | 8.2 | ||||||||
Number of Issues in Loss Position: | ||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||
One to six months | 92 | — | — | 92 | ||||||||||||
Seven to twelve months | 4 | — | — | 4 | ||||||||||||
More than twelve months | 11 | 1 | — | 12 | ||||||||||||
Total | 107 | 1 | — | 108 | (g) | |||||||||||
Equity Securities: | ||||||||||||||||
One to six months | 3 | — | — | 3 | ||||||||||||
Seven to twelve months | — | — | — | — | ||||||||||||
More than twelve months | 1 | 1 | — | 2 | ||||||||||||
Total | 4 | 1 | — | 5 | (g) | |||||||||||
(g) | At March 31, 2010 the number of issues in an unrealized loss position represent 5.3% as to fixed maturities, and 31.3% as to equity securities of the total number of such issues held by the Company. |
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March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Maturity Ranges: | ||||||||
Due in one year or less | 10.9 | % | 9.3 | % | ||||
Due after one year through five years | 53.2 | 55.0 | ||||||
Due after five years through ten years | 35.1 | 34.9 | ||||||
Due after ten years through fifteen years | .8 | .8 | ||||||
Due after fifteen years | — | — | ||||||
Total | 100.0 | % | 100.0 | % | ||||
Average Maturity in Years | 4.3 | 4.4 | ||||||
Duration(h) | 3.7 | 3.8 | ||||||
(h) | Duration is used as a measure of bond price sensitivity to interest rate changes. A duration of 3.7 as of March 31, 2010 implies that a 100 basis point parallel increase in interest rates from current levels would result in a possible decline in the fair value of the long-term fixed maturity investment portfolio of approximately 3.7%. |
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Fixed Maturity Securities: | ||||||||
Amortized cost | $ | 7,877.1 | $ | 7,896.2 | ||||
Estimated fair value | 8,352.2 | 8,326.8 | ||||||
Gross unrealized gains | 482.8 | 448.0 | ||||||
Gross unrealized losses | (7.7 | ) | (17.4 | ) | ||||
Net unrealized gains (losses) | $ | 475.0 | $ | 430.5 | ||||
Equity Securities: | ||||||||
Original cost | $ | 675.9 | $ | 674.9 | ||||
Adjusted cost(*) | 358.6 | 357.5 | ||||||
Estimated fair value | 631.4 | 502.9 | ||||||
Gross unrealized gains | 281.0 | 159.0 | ||||||
Gross unrealized losses | (8.2 | ) | (13.7 | ) | ||||
Net unrealized gains (losses) | $ | 272.7 | $ | 145.3 | ||||
(*) | net of OTTI adjustments |
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B. | Years Ended December 31, 2009, 2008 and 2007 |
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December 31, | ||||||||
2009 | 2008 | |||||||
Aaa | 22.3 | % | 20.4 | % | ||||
Aa | 20.3 | 24.5 | ||||||
A | 30.3 | 31.4 | ||||||
Baa | 25.7 | 22.0 | ||||||
Total investment grade | 98.6 | 98.3 | ||||||
All other(b) | 1.4 | 1.7 | ||||||
Total | 100.0 | % | 100.0 | % | ||||
(a) | Credit quality ratings used are those assigned primarily by Moody’s for U.S. Governments, Agencies and Corporate issuers and by Standard & Poor’s (“S&P”) for U.S. and Canadian Municipal issuers, which are converted to equivalent Moody’s ratings classifications. In the second quarter of 2009, Old Republic changed its source of credit quality ratings from Moody’s to S&P for U.S. Municipal issuers due to their wider credit coverage. The December 31, 2008 disclosures have been restated to be comparable to the current period classifications. The effect of such change moderately improved the previously reported credit quality ratings. | |
(b) | “All other” includes non-investment grade or non-rated issuers. |
December 31, 2009 | ||||||||
Gross | ||||||||
Amortized | Unrealized | |||||||
Cost | Losses | |||||||
Fixed Maturity Securities by Industry Concentration: | ||||||||
Banking | $ | 23.0 | $ | 5.1 | ||||
Retail | 11.5 | .7 | ||||||
Industrial | 17.4 | .5 | ||||||
Consumer non-durables | 9.9 | .1 | ||||||
Other (includes 2 industry groups) | 7.5 | .1 | ||||||
Total | $ | 69.6 | (c) | $ | 6.6 | |||
(c) | Represents .9% of the total fixed maturity securities portfolio. |
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December 31, 2009 | ||||||||
Gross | ||||||||
Amortized | Unrealized | |||||||
Cost | Losses | |||||||
Fixed Maturity Securities by Industry Concentration: | ||||||||
U.S. Government & Agencies | $ | 302.7 | $ | 2.9 | ||||
Banking | 36.3 | 1.5 | ||||||
Energy | 45.6 | 1.2 | ||||||
Industrial | 51.7 | 1.0 | ||||||
Other (includes 15 industry groups) | 277.2 | 3.9 | ||||||
Total | $ | 713.9 | (d) | $ | 10.8 | |||
(d) | Represents 9.0% of the total fixed maturity securities portfolio. |
December 31, 2009 | ||||||||
Gross | ||||||||
Unrealized | ||||||||
Cost | Losses | |||||||
Equity Securities by Industry Concentration: | ||||||||
Index Funds | $ | 112.8 | $ | 13.3 | ||||
Finance | 1.2 | .2 | ||||||
Natural Gas | .3 | — | ||||||
Insurance | .2 | — | ||||||
Total | $ | 114.6 | (e) | $ | 13.7 | (f) | ||
(e) | Represents 32.1% of the total equity securities portfolio. |
(f) | Represents 3.8% of the cost of the total equity securities portfolio, while gross unrealized gains represent 44.5% of the portfolio. |
December 31, 2009 | ||||||||||||||||
Amortized Cost of Fixed Maturity Securities | Gross Unrealized Losses | |||||||||||||||
Non- | Non- | |||||||||||||||
Investment | Investment | |||||||||||||||
All | Grade Only | All | Grade Only | |||||||||||||
Maturity Ranges: | ||||||||||||||||
Due in one year or less | $ | .9 | $ | — | $ | — | $ | — | ||||||||
Due after one year through five years | 339.1 | 43.1 | 5.4 | 3.2 | ||||||||||||
Due after five years through ten years | 399.8 | 26.5 | 10.2 | 3.3 | ||||||||||||
Due after ten years | 43.7 | — | 1.6 | — | ||||||||||||
Total | $ | 783.5 | $ | 69.6 | $ | 17.4 | $ | 6.6 | ||||||||
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December 31, 2009 | ||||||||||||||||
Amount of Gross Unrealized Losses | ||||||||||||||||
Less Than | Total Gross | |||||||||||||||
20% of | 20% to 50% | More Than | Unrealized | |||||||||||||
Cost | of Cost | 50% of Cost | Loss | |||||||||||||
Number of Months in Loss Position: | ||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||
One to six months | $ | 8.4 | $ | — | $ | — | $ | 8.4 | ||||||||
Seven to twelve months | — | — | — | — | ||||||||||||
More than twelve months | 3.6 | 5.3 | — | 8.9 | ||||||||||||
Total | $ | 12.0 | $ | 5.3 | $ | — | $ | 17.4 | ||||||||
Equity Securities: | ||||||||||||||||
One to six months | $ | — | $ | .2 | $ | — | $ | .2 | ||||||||
Seven to twelve months | — | — | — | — | ||||||||||||
More than twelve months | 13.3 | — | — | 13.4 | ||||||||||||
Total | $ | 13.4 | $ | .3 | $ | — | $ | 13.7 | ||||||||
Number of Issues in Loss Position: | ||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||
One to six months | 119 | — | — | 119 | ||||||||||||
Seven to twelve months | 1 | — | — | 1 | ||||||||||||
More than twelve months | 32 | 3 | — | 35 | ||||||||||||
Total | 152 | 3 | — | 155 | (g) | |||||||||||
Equity Securities: | ||||||||||||||||
One to six months | 1 | 1 | — | 2 | ||||||||||||
Seven to twelve months | — | — | — | — | ||||||||||||
More than twelve months | 2 | 1 | — | 3 | ||||||||||||
Total | 3 | 2 | — | 5 | (g) | |||||||||||
(g) | At December 31, 2009 the number of issues in an unrealized loss position represent 7.5% as to fixed maturities, and 31.3% as to equity securities of the total number of such issues held by Old Republic. |
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December 31, | ||||||||
2009 | 2008 | |||||||
Maturity Ranges: | ||||||||
Due in one year or less | 9.3 | % | 14.0 | % | ||||
Due after one year through five years | 55.0 | 51.0 | ||||||
Due after five years through ten years | 34.9 | 34.7 | ||||||
Due after ten years through fifteen years | .8 | .3 | ||||||
Due after fifteen years | — | — | ||||||
Total | 100.0 | % | 100.0 | % | ||||
Average Maturity in Years | 4.4 | 4.4 | ||||||
Duration(h) | 3.8 | 3.7 | ||||||
(h) | Duration is used as a measure of bond price sensitivity to interest rate changes. A duration of 3.8 as of December 31, 2009 implies that a 100 basis point parallel increase in interest rates from current levels would result in a possible decline in the fair value of the long-term fixed maturity investment portfolio of approximately 3.8%. |
December 31, | ||||||||
2009 | 2008 | |||||||
Fixed Maturity Securities: | ||||||||
Amortized cost | $ | 7,896.2 | $ | 7,385.2 | ||||
Estimated fair value | 8,326.8 | 7,406.9 | ||||||
Gross unrealized gains | 448.0 | 196.8 | ||||||
Gross unrealized losses | (17.4 | ) | (175.0 | ) | ||||
Net unrealized gains (losses) | $ | 430.5 | $ | 21.7 | ||||
Equity Securities: | ||||||||
Original cost | $ | 674.9 | $ | 729.2 | ||||
Adjusted cost(*) | 357.5 | 373.3 | ||||||
Estimated fair value | 502.9 | 350.3 | ||||||
Gross unrealized gains | 159.0 | 49.6 | ||||||
Gross unrealized losses | (13.7 | ) | (72.7 | ) | ||||
Net unrealized gains (losses) | $ | 145.3 | $ | (23.0 | ) | |||
(*) | net of OTTI adjustments |
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Payments Due in the Following Years | ||||||||||||||||||||
2011 and | 2013 and | 2015 and | ||||||||||||||||||
Total | 2010 | 2012 | 2014 | After | ||||||||||||||||
Contractual Obligations: | ||||||||||||||||||||
Debt | $ | 346.7 | $ | 3.6 | $ | 322.2 | $ | 5.9 | $ | 15.0 | ||||||||||
Interest on Debt | 68.4 | 26.4 | 39.7 | 1.2 | 1.0 | |||||||||||||||
Operating Leases | 168.2 | 38.7 | 55.0 | 32.5 | 41.8 | |||||||||||||||
Pension Benefits Contributions(a) | 86.0 | 1.8 | 35.9 | 26.3 | 22.0 | |||||||||||||||
Claim & Claim Expense Reserves(b) | 7,915.0 | 2,562.8 | 2,067.3 | 716.7 | 2,568.0 | |||||||||||||||
Total | $ | 8,584.5 | $ | 2,633.4 | $ | 2,520.2 | $ | 782.7 | $ | 2,648.0 | ||||||||||
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(a) | Represents estimated minimum funding of contributions for the Old Republic International Salaried Employees Restated Retirement Plan (the Old Republic Plan), the Bituminous Casualty Corporation Retirement Income Plan (the Bitco Plan), and the Old Republic National Title Group Pension Plan (the Title Plan). Funding of the plans is dependent on a number of factors including actual performance versus actuarial assumptions made at the time of the actuarial valuations, as well as, maintaining certain funding levels relative to regulatory requirements. | |
(b) | Amounts are reported gross of reinsurance. As discussed herein with respect to the nature of loss reserves and the estimating process utilized in their establishment, Old Republic’s loss reserves do not have a contractual maturity date. Estimated gross loss payments are based primarily on historical claim payment patterns, are subject to change due to a wide variety of factors, do not reflect anticipated recoveries under the terms of reinsurance contracts, and cannot be predicted with certainty. Actual future loss payments may differ materially from the current estimates shown in the table above. |
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Earned Premiums and Fees | ||||||||||||||||||||||||
% Change | ||||||||||||||||||||||||
from Prior | ||||||||||||||||||||||||
General | Mortgage | Title | Other | Total | Period | |||||||||||||||||||
Years Ended December 31: | ||||||||||||||||||||||||
2007 | $ | 2,155.1 | $ | 518.2 | $ | 850.7 | $ | 77.0 | $ | 3,601.2 | 5.9 | % | ||||||||||||
2008 | 1,989.3 | 592.5 | 656.1 | 80.1 | 3,318.1 | (7.9 | ) | |||||||||||||||||
2009 | 1,782.5 | 644.5 | 888.4 | 73.3 | 3,388.9 | 2.1 | ||||||||||||||||||
Quarters Ended March 31: | ||||||||||||||||||||||||
2009 | 457.3 | 145.3 | 154.3 | 20.4 | 777.4 | (8.2 | ) | |||||||||||||||||
2010 | $ | 411.8 | $ | 136.2 | $ | 255.2 | $ | 25.1 | $ | 828.5 | 6.6 | % | ||||||||||||
General Insurance Earned Premiums by Type of Coverage | ||||||||||||||||||||||||
Commercial | Inland | |||||||||||||||||||||||
Automobile | Marine | |||||||||||||||||||||||
(Mostly | Workers’ | Financial | and | General | ||||||||||||||||||||
Trucking) | Compensation | Indemnity | Property | Liability | Other | |||||||||||||||||||
Years Ended December 31: | ||||||||||||||||||||||||
2007 | 35.0 | % | 23.5 | % | 13.8 | % | 9.3 | % | 7.8 | % | 10.6 | % | ||||||||||||
2008 | 34.9 | 21.0 | 16.1 | 9.7 | 7.5 | 10.8 | ||||||||||||||||||
2009 | 36.6 | 21.7 | 13.5 | 9.5 | 8.0 | 10.7 | ||||||||||||||||||
Quarters Ended March 31: | ||||||||||||||||||||||||
2009 | 35.2 | 22.5 | 14.5 | 9.7 | 8.5 | 9.6 | ||||||||||||||||||
2010 | 39.3 | % | 22.9 | % | 11.5 | % | 9.5 | % | 7.1 | % | 9.7 | % | ||||||||||||
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Mortgage Guaranty Production by Type | ||||||||||||||||
Traditional | ||||||||||||||||
Primary | Bulk | Other | Total | |||||||||||||
New Insurance Written: | ||||||||||||||||
Years Ended December 31: | ||||||||||||||||
2007 | $ | 31,841.7 | $ | 10,800.3 | $ | 901.6 | $ | 43,543.7 | ||||||||
2008 | 20,861.9 | 3.5 | 1,123.5 | 21,989.0 | ||||||||||||
2009 | 7,899.2 | — | .5 | 7,899.8 | ||||||||||||
Quarters Ended March 31: | ||||||||||||||||
2009 | 2,212.0 | — | .5 | 2,212.6 | ||||||||||||
2010 | $ | 748.3 | $ | — | $ | — | $ | 748.3 | ||||||||
Traditional | ||||||||||||||||
Primary | Bulk | Other | Total | |||||||||||||
New Risk Written by Type: | ||||||||||||||||
Years Ended December 31: | ||||||||||||||||
2007 | $ | 7,844.5 | $ | 724.5 | $ | 15.2 | $ | 8,584.4 | ||||||||
2008 | 4,815.0 | .6 | 11.8 | 4,827.5 | ||||||||||||
2009 | 1,681.7 | — | — | 1,681.7 | ||||||||||||
Quarters Ended March 31: | ||||||||||||||||
2009 | 468.4 | — | — | 468.4 | ||||||||||||
2010 | $ | 168.2 | $ | — | $ | — | $ | 168.2 | ||||||||
Earned Premiums | Persistency | |||||||||||||||
Traditional | ||||||||||||||||
Direct | Net | Primary | Bulk | |||||||||||||
Premium and Persistency Trends by Type: | ||||||||||||||||
Years Ended December 31: | ||||||||||||||||
2007 | $ | 612.7 | $ | 518.2 | 77.6 | % | 73.7 | % | ||||||||
2008 | 698.4 | 592.5 | 83.9 | 88.4 | ||||||||||||
2009 | 648.6 | 644.5 | 82.8 | 88.3 | ||||||||||||
Quarters Ended March 31: | ||||||||||||||||
2009 | 170.3 | 145.3 | 83.3 | 89.7 | ||||||||||||
2010 | $ | 145.8 | $ | 136.2 | 83.6 | % | 88.3 | % | ||||||||
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Net Risk in Force | ||||||||||||||||
Traditional | ||||||||||||||||
Primary | Bulk | Other | Total | |||||||||||||
Net Risk in Force By Type: | ||||||||||||||||
As of December 31: | ||||||||||||||||
2007 | $ | 18,808.5 | $ | 2,539.9 | $ | 511.1 | $ | 21,859.5 | ||||||||
2008 | 20,463.0 | 2,055.0 | 457.0 | 22,975.1 | ||||||||||||
2009 | 18,727.9 | 1,776.7 | 297.2 | 20,801.9 | ||||||||||||
As of March 31: | ||||||||||||||||
2009 | 19,809.1 | 2,006.8 | 386.7 | 22,202.7 | ||||||||||||
2010 | $ | 18,209.6 | $ | 1,507.4 | $ | 274.8 | $ | 19,991.9 | ||||||||
Analysis of Risk in Force | ||||||||||||||||
FICO | ||||||||||||||||
FICO Less | FICO 620 | Greater | Unscored/ | |||||||||||||
Than 620 | to 680 | Than 680 | Unavailable | |||||||||||||
Risk in Force Distribution By FICO Scores: | ||||||||||||||||
Traditional Primary: | ||||||||||||||||
As of December 31: | ||||||||||||||||
2007 | 8.5 | % | 33.6 | % | 55.1 | % | 2.8 | % | ||||||||
2008 | 7.0 | 30.5 | 60.5 | 2.0 | ||||||||||||
2009 | 6.5 | 28.8 | 63.1 | 1.6 | ||||||||||||
As of March 31: | ||||||||||||||||
2009 | 6.8 | 30.2 | 61.2 | 1.8 | ||||||||||||
2010 | 6.5 | % | 28.5 | % | 63.4 | % | 1.6 | % | ||||||||
Bulk(a): | ||||||||||||||||
As of December 31: | ||||||||||||||||
2007 | 19.4 | % | 34.9 | % | 45.4 | % | .3 | % | ||||||||
2008 | 18.2 | 33.7 | 47.9 | .2 | ||||||||||||
2009 | 17.6 | 33.1 | 49.2 | .1 | ||||||||||||
As of March 31: | ||||||||||||||||
2009 | 18.0 | 33.7 | 48.1 | .2 | ||||||||||||
2010 | 20.2 | % | 33.4 | % | 46.3 | % | .1 | % | ||||||||
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LTV | LTV | LTV | LTV | |||||||||||||
85.0 | 85.01 | 90.01 | Greater | |||||||||||||
and Below | to 90.0 | to 95.0 | Than 95.0 | |||||||||||||
Risk in Force Distribution By Loan to Value (“LTV”) Ratio: | ||||||||||||||||
Traditional Primary: | ||||||||||||||||
As of December 31: | ||||||||||||||||
2007 | 4.7 | % | 34.4 | % | 32.0 | % | 28.9 | % | ||||||||
2008 | 5.1 | 35.5 | 31.6 | 27.8 | ||||||||||||
2009 | 5.3 | 36.4 | 31.6 | 26.7 | ||||||||||||
As of March 31: | ||||||||||||||||
2009 | 5.2 | 35.8 | 31.4 | 27.6 | ||||||||||||
2010 | 5.3 | % | 36.5 | % | 31.6 | % | 26.6 | % | ||||||||
Bulk(a): | ||||||||||||||||
As of December 31: | ||||||||||||||||
2007 | 62.0 | % | 20.9 | % | 9.3 | % | 7.8 | % | ||||||||
2008 | 63.5 | 20.1 | 8.6 | 7.8 | ||||||||||||
2009 | 65.9 | 18.4 | 7.8 | 7.9 | ||||||||||||
As of March 31: | ||||||||||||||||
2009 | 64.0 | 19.8 | 8.4 | 7.8 | ||||||||||||
2010 | 61.8 | % | 20.6 | % | 8.7 | % | 8.9 | % | ||||||||
Traditional Primary | ||||||||||||||||||||||||||||||||||||||||
FL | TX | GA | IL | OH | CA | NJ | VA | NC | PA | |||||||||||||||||||||||||||||||
As of December 31: | ||||||||||||||||||||||||||||||||||||||||
2007 | 8.9 | % | 7.7 | % | 5.3 | % | 5.2 | % | 3.4 | % | 4.5 | % | 3.1 | % | 2.8 | % | 4.5 | % | 3.8 | % | ||||||||||||||||||||
2008 | 8.3 | 8.1 | 5.2 | 5.2 | 3.2 | 5.5 | 3.1 | 2.9 | 4.4 | 3.8 | ||||||||||||||||||||||||||||||
2009 | 8.1 | 8.5 | 5.2 | 5.1 | 3.2 | 5.5 | 3.1 | 2.9 | 4.5 | 4.0 | ||||||||||||||||||||||||||||||
As of March 31: | ||||||||||||||||||||||||||||||||||||||||
2009 | 8.3 | 8.1 | 5.2 | 5.1 | 3.1 | 5.7 | 3.1 | 2.9 | 4.3 | 3.9 | ||||||||||||||||||||||||||||||
2010 | 8.0 | % | 8.5 | % | 5.2 | % | 5.1 | % | 3.2 | % | 5.4 | % | 3.1 | % | 2.9 | % | 4.5 | % | 4.0 | % | ||||||||||||||||||||
Bulk(a) | ||||||||||||||||||||||||||||||||||||||||
FL | TX | GA | IL | OH | CA | NJ | AZ | CO | NY | |||||||||||||||||||||||||||||||
As of December 31: | ||||||||||||||||||||||||||||||||||||||||
2007 | 9.3 | % | 4.8 | % | 4.2 | % | 4.1 | % | 3.1 | % | 17.5 | % | 3.4 | % | 4.2 | % | 3.0 | % | 5.5 | % | ||||||||||||||||||||
2008 | 10.0 | 4.6 | 4.0 | 3.9 | 3.1 | 18.2 | 3.4 | 4.3 | 2.9 | 5.4 | ||||||||||||||||||||||||||||||
2009 | 10.4 | 4.6 | 4.0 | 4.0 | 3.2 | 17.8 | 3.5 | 4.1 | 3.0 | 5.4 | ||||||||||||||||||||||||||||||
As of March 31: | ||||||||||||||||||||||||||||||||||||||||
2009 | 10.1 | 4.6 | 4.0 | 3.9 | 3.1 | 18.2 | 3.5 | 4.3 | 3.0 | 5.4 | ||||||||||||||||||||||||||||||
2010 | 9.9 | % | 5.1 | % | 4.1 | % | 4.0 | % | 3.5 | % | 16.2 | % | 3.5 | % | 3.9 | % | 3.0 | % | 5.8 | % | ||||||||||||||||||||
(a) | Bulk pool risk in-force, which represented 39.8% and 46.8% of total bulk risk in-force at March 31, 2010 and December 31, 2009, respectively, has been allocated pro-rata based on insurance in-force. |
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Full | Reduced | |||||||
Documentation | Documentation | |||||||
Risk in Force Distribution By Level of Documentation: | ||||||||
Traditional Primary: | ||||||||
As of December 31: | ||||||||
2007 | 88.0 | % | 12.0 | % | ||||
2008 | 90.0 | 10.0 | ||||||
2009 | 91.1 | 8.9 | ||||||
As of March 31: | ||||||||
2009 | 90.1 | 9.9 | ||||||
2010 | 91.4 | % | 8.6 | % | ||||
Bulk(a): | ||||||||
As of December 31: | ||||||||
2007 | 49.6 | % | 50.4 | % | ||||
2008 | 49.1 | 50.9 | ||||||
2009 | 49.4 | 50.6 | ||||||
As of March 31: | ||||||||
2009 | 49.0 | 51.0 | ||||||
2010 | 53.1 | % | 46.9 | % | ||||
Fixed Rate | ||||||||
& ARMS | ARMS | |||||||
with Resets | with Resets | |||||||
>= 5 years | < 5 years | |||||||
Risk in Force Distribution By Loan Type: | ||||||||
Traditional Primary: | ||||||||
As of December 31: | ||||||||
2007 | 94.4 | % | 5.6 | % | ||||
2008 | 95.8 | 4.2 | ||||||
2009 | 96.3 | 3.7 | ||||||
As of March 31: | ||||||||
2009 | 95.8 | 4.2 | ||||||
2010 | 96.4 | % | 3.6 | % | ||||
Bulk(a): | ||||||||
As of December 31: | ||||||||
2007 | 70.9 | % | 29.1 | % | ||||
2008 | 74.4 | 25.6 | ||||||
2009 | 75.4 | 24.6 | ||||||
As of March 31: | ||||||||
2009 | 74.8 | 25.2 | ||||||
2010 | 72.6 | % | 27.4 | % | ||||
(a) | Bulk pool risk in-force, which represented 39.8% and 46.8% of total bulk risk in-force at March 31, 2010 and December 31,2009, respectively, has been allocated pro-rata based on insurance in-force. |
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Title Premium and Fee Production by Source | ||||||||
Independent | ||||||||
Title | ||||||||
Direct | Agents & | |||||||
Operations | Other | |||||||
Years Ended December 31: | ||||||||
2007 | 32.1 | % | 67.9 | % | ||||
2008 | 36.8 | 63.2 | ||||||
2009 | 38.5 | 61.5 | ||||||
Quarters Ended March 31: | ||||||||
2009 | 43.5 | 56.5 | ||||||
2010 | 36.6 | % | 63.4 | % | ||||
Fair | Invested | |||||||||||||||||||||||||||
Invested Assets at Adjusted Cost | Value | Assets at | ||||||||||||||||||||||||||
Corporate | Adjust- | Fair | ||||||||||||||||||||||||||
General | Mortgage | Title | and Other | Total | ment | Value | ||||||||||||||||||||||
As of December 31: | ||||||||||||||||||||||||||||
2008 | $ | 5,618.7 | $ | 2,099.7 | $ | 545.8 | $ | 417.5 | $ | 8,681.8 | $ | 1.0 | $ | 8,682.9 | ||||||||||||||
2009 | 5,670.9 | 2,466.3 | 615.2 | 355.2 | 9,107.8 | 580.6 | 9,688.4 | |||||||||||||||||||||
As of March 31: | ||||||||||||||||||||||||||||
2009 | 5,625.9 | 2,354.9 | 564.0 | 338.9 | 8,883.9 | 1.2 | 8,885.2 | |||||||||||||||||||||
2010 | $ | 5,700.4 | $ | 2,379.2 | $ | 598.1 | $ | 368.2 | $ | 9,046.1 | $ | 752.3 | $ | 9,798.5 | ||||||||||||||
Net Investment Income | Yield at | |||||||||||||||||||||||||||
Corporate | Original | Fair | ||||||||||||||||||||||||||
General | Mortgage | Title | and Other | Total | Cost | Value | ||||||||||||||||||||||
Years Ended December 31: | ||||||||||||||||||||||||||||
2007 | $ | 260.8 | $ | 79.0 | $ | 27.3 | $ | 12.7 | $ | 379.9 | 4.58 | % | 4.52 | % | ||||||||||||||
2008 | 253.6 | 86.8 | 25.1 | 11.6 | 377.3 | 4.27 | 4.33 | |||||||||||||||||||||
2009 | 258.9 | 92.0 | 25.2 | 7.2 | 383.5 | 4.15 | 4.17 | |||||||||||||||||||||
Quarters Ended March 31: | ||||||||||||||||||||||||||||
2009 | 63.4 | 22.4 | 5.8 | 1.6 | 93.4 | 4.09 | 4.25 | |||||||||||||||||||||
2010 | $ | 64.6 | $ | 23.1 | $ | 6.6 | $ | 1.8 | $ | 96.2 | 4.09 | % | 3.95 | % | ||||||||||||||
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Realized Gains (Losses) on | ||||||||||||||||||||||||||||
Disposition of Securities | Impairment Losses on Securities | |||||||||||||||||||||||||||
Equity | Equity | Net | ||||||||||||||||||||||||||
Fixed | Securities and | Fixed | Securities and | Realized | ||||||||||||||||||||||||
Maturity | Miscellaneous | Maturity | Miscellaneous | Gains | ||||||||||||||||||||||||
Securities | Investments | Total | Securities | Investments | Total | (Losses) | ||||||||||||||||||||||
Years Ended December 31: | ||||||||||||||||||||||||||||
2007 | $ | 2.2 | $ | 68.1 | $ | 70.3 | $ | — | $ | — | $ | — | $ | 70.3 | ||||||||||||||
2008 | (25.0 | ) | 20.9 | (4.1 | ) | (11.5 | ) | (470.7 | ) | (482.3 | ) | (486.4 | ) | |||||||||||||||
2009 | 4.2 | 11.7 | 15.9 | (1.5 | ) | (8.0 | ) | (9.5 | ) | 6.3 | ||||||||||||||||||
Quarters Ended March 31: | ||||||||||||||||||||||||||||
2009 | — | — | — | — | — | — | — | |||||||||||||||||||||
2010 | $ | 2.9 | $ | — | $ | 2.9 | $ | — | $ | — | $ | — | $ | 2.9 | ||||||||||||||
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Claim and Loss Adjustment Expense Reserves | ||||||||||||||||
March 31, 2010 | December 31, 2009 | |||||||||||||||
Gross | Net | Gross | Net | |||||||||||||
Commercial automobile (mostly trucking) | $ | 1,067.2 | $ | 881.0 | $ | 1,049.4 | $ | 860.5 | ||||||||
Workers’ compensation | 2,253.9 | 1,284.4 | 2,258.1 | 1,285.6 | ||||||||||||
General liability | 1,278.5 | 637.2 | 1,281.8 | 638.7 | ||||||||||||
Other coverages | 633.8 | 429.8 | 649.1 | 444.7 | ||||||||||||
Unallocated loss adjustment expense reserves | 147.8 | 104.7 | 141.9 | 104.7 | ||||||||||||
Total general insurance reserves | 5,381.4 | 3,337.3 | 5,380.4 | 3,334.3 | ||||||||||||
Mortgage guaranty | 2,083.5 | 1,813.3 | 2,225.6 | 1,962.6 | ||||||||||||
Title | 260.1 | 260.1 | 260.8 | 260.8 | ||||||||||||
Life and health | 29.9 | 23.5 | 29.0 | 21.5 | ||||||||||||
Unallocated loss adjustment expense reserves — other coverages | 19.7 | 19.7 | 19.1 | 19.1 | ||||||||||||
Total claim and loss adjustment expense reserves | $ | 7,774.8 | $ | 5,454.1 | $ | 7,915.0 | $ | 5,598.5 | ||||||||
Asbestosis and environmental claim reserves included | ||||||||||||||||
in the above general insurance reserves: | ||||||||||||||||
Amount | $ | 170.2 | $ | 135.6 | $ | 172.8 | $ | 136.9 | ||||||||
% of total general insurance reserves | 3.2 | % | 4.1 | % | 3.2 | % | 4.1 | % | ||||||||
Quarter Ended March 31, | ||||||||
2010 | 2009 | |||||||
Reserve increase(decrease): | ||||||||
General Insurance | $ | 3.0 | $ | (13.5 | ) | |||
Mortgage Guaranty | (148.9 | ) | 134.8 | |||||
Title Insurance | (.4 | ) | (5.8 | ) | ||||
Other | 2.0 | 2.2 | ||||||
Total | $ | (144.3 | ) | $ | 117.7 | |||
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
General Insurance | $ | 1,653.9 | $ | 1,621.6 | ||||
Mortgage Guaranty | 37.7 | 39.7 | ||||||
Title Insurance | 187.7 | 191.3 | ||||||
Other | 8.5 | 9.4 | ||||||
Total | $ | 1,887.9 | $ | 1,862.0 | ||||
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Claim and Loss Adjustment Expense Reserves | ||||||||||||||||
December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Gross | Net | Gross | Net | |||||||||||||
Commercial automobile (mostly trucking) | $ | 1,049.4 | $ | 860.5 | $ | 1,035.7 | $ | 849.8 | ||||||||
Workers’ compensation | 2,258.1 | 1,285.6 | 2,241.6 | 1,271.8 | ||||||||||||
General liability | 1,281.8 | 638.7 | 1,209.2 | 612.3 | ||||||||||||
Other coverages | 649.1 | 444.7 | 709.7 | 487.9 | ||||||||||||
Unallocated loss adjustment expense reserves | 141.9 | 104.7 | 150.6 | 104.9 | ||||||||||||
Total general insurance reserves | 5,380.4 | 3,334.3 | 5,346.9 | 3,326.9 | ||||||||||||
Mortgage guaranty | 2,225.6 | 1,962.6 | 1,581.7 | 1,380.6 | ||||||||||||
Title | 260.8 | 260.8 | 261.2 | 261.2 | ||||||||||||
Life and health | 29.0 | 21.5 | 28.1 | 22.2 | ||||||||||||
Unallocated loss adjustment expense reserves — other coverages | 19.1 | 19.1 | 23.2 | 23.2 | ||||||||||||
Total claim and loss adjustment expense reserves | $ | 7,915.0 | $ | 5,598.5 | $ | 7,241.3 | $ | 5,014.2 | ||||||||
Asbestosis and environmental claim reserves included in the above general insurance reserves: | ||||||||||||||||
Amount | $ | 172.8 | $ | 136.9 | $ | 172.4 | $ | 145.0 | ||||||||
% of total general insurance reserves | 3.2 | % | 4.1 | % | 3.2 | % | 4.4 | % | ||||||||
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Years Ended December 31: | 2009 | 2008 | 2007 | |||||||||
Gross reserves at beginning of year | $ | 7,241.3 | $ | 6,231.1 | $ | 5,534.7 | ||||||
Less: reinsurance losses recoverable | 2,227.0 | 1,984.7 | 1,936.6 | |||||||||
Net reserves at beginning of year: | ||||||||||||
General Insurance | 3,326.9 | 3,279.7 | 3,022.8 | |||||||||
Mortgage Guaranty | 1,382.6 | 644.9 | 249.6 | |||||||||
Title Insurance | 282.4 | 296.9 | 304.1 | |||||||||
Other | 22.2 | 24.7 | 21.6 | |||||||||
Sub-total | 5,014.2 | 4,246.3 | 3,598.0 | |||||||||
Incurred claims and claim adjustment expenses: | ||||||||||||
Provisions for insured events of the current year: | ||||||||||||
General Insurance | 1,409.2 | 1,520.1 | 1,562.8 | |||||||||
Mortgage Guaranty | 1,284.0 | 1,199.5 | 551.3 | |||||||||
Title Insurance | 63.6 | 46.3 | 72.3 | |||||||||
Other | 36.4 | 41.9 | 37.8 | |||||||||
Sub-total | 2,793.3 | 2,807.8 | 2,224.2 | |||||||||
Change in provision for insured events of prior years: | ||||||||||||
General Insurance | (56.8 | ) | (83.0 | ) | (110.6 | ) | ||||||
Mortgage Guaranty(a) | (149.9 | ) | (18.7 | ) | 64.4 | |||||||
Title Insurance | 6.7 | (0.6 | ) | (16.3 | ) | |||||||
Other | (1.3 | ) | (3.8 | ) | (3.6 | ) | ||||||
Sub-total | (201.3 | ) | (106.1 | ) | (66.1 | ) | ||||||
Total incurred claims and claim adjustment expenses(a) | 2,592.0 | 2,701.6 | 2,158.1 | |||||||||
Payments: | ||||||||||||
Claims and claim adjustment expenses attributable to insured events of the current year: | ||||||||||||
General Insurance | 498.6 | 549.0 | 518.7 | |||||||||
Mortgage Guaranty(a) | 7.8 | 59.8 | 29.6 | |||||||||
Title Insurance | 7.1 | 5.4 | 7.5 | |||||||||
Other | 25.8 | 30.3 | 23.9 | |||||||||
Sub-total | 539.3 | 644.5 | 579.7 | |||||||||
Claims and claim adjustment expenses attributable to insured events of prior years: | ||||||||||||
General Insurance | 846.4 | 840.8 | 676.3 | |||||||||
Mortgage Guaranty(a) | 543.5 | 383.2 | 190.8 | |||||||||
Title Insurance | 68.5 | 54.8 | 55.8 | |||||||||
Other | 9.9 | 10.2 | 7.1 | |||||||||
Sub-total | 1,468.3 | 1,289.0 | 930.0 | |||||||||
Total payments | 2,007.7 | 1,933.5 | 1,509.8 | |||||||||
Amount of reserves for unpaid claims and claim adjustment expenses at the end of each year, net of reinsurance losses recoverable:(b) | ||||||||||||
General Insurance | 3,334.3 | 3,326.9 | 3,279.7 | |||||||||
Mortgage Guaranty | 1,965.4 | 1,382.6 | 644.9 | |||||||||
Title Insurance | 277.1 | 282.4 | 296.9 | |||||||||
Other | 21.5 | 22.2 | 24.7 | |||||||||
Sub-total | 5,598.5 | 5,014.2 | 4,246.3 | |||||||||
Reinsurance losses recoverable | 2,316.5 | 2,227.0 | 1,984.7 | |||||||||
Gross reserves at end of year | $ | 7,915.0 | $ | 7,241.3 | $ | 6,231.1 | ||||||
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(a) | In common with all other insurance lines, mortgage guaranty paid and incurred claim and claim adjustment expenses include only those costs actually or expected to be paid by Old Republic. Claims not paid by virtue of coverage rescissions and claims denials amounted to $719.5, $211.0, and $36.4 for 2009, 2008, and 2007, respectively. In a similar vein, changes in mortgage guaranty aggregate case, IBNR, and loss adjustment expense reserves shown in the following table and entering into the determination of incurred claim costs, take into account, among a large number of variables, claim cost reductions for anticipated coverage rescissions and claims denials of $881.9 in 2009, $830.5 in 2008, and none in 2007. The significant decline of $149.9 in 2009 for prior years’ mortgage guaranty incurred claim provisions resulted mostly from greater than anticipated coverage rescissions and claim denials. |
2009 | 2008 | 2007 | ||||||||||
Reserve increase(decrease): | ||||||||||||
General Insurance | $ | 7.4 | $ | 47.2 | $ | 256.9 | ||||||
Mortgage Guaranty | 582.8 | 737.7 | 395.3 | |||||||||
Title Insurance | (5.3 | ) | (14.5 | ) | (7.2 | ) | ||||||
Other | (.7 | ) | (2.5 | ) | 3.1 | |||||||
Total | $ | 584.3 | $ | 768.0 | $ | 648.3 | ||||||
(b) | Year end IBNR reserves carried in each segment were as follows: |
2009 | 2008 | 2007 | ||||||||||
General Insurance | $ | 1,621.6 | $ | 1,583.8 | $ | 1,539.0 | ||||||
Mortgage Guaranty | 39.7 | 33.0 | 20.8 | |||||||||
Title Insurance | 191.3 | 200.7 | 223.4 | |||||||||
Other | 9.4 | 9.0 | 11.8 | |||||||||
Total | $ | 1,862.0 | $ | 1,826.5 | $ | 1,795.0 | ||||||
General | Mortgage | Title | Consolidated | |||||||||||||
Years Ended December 31: | ||||||||||||||||
2007 | 67.8 | % | 118.8 | % | 6.6 | % | 60.2 | % | ||||||||
2008 | 73.0 | 199.3 | 7.0 | 81.8 | ||||||||||||
2009 | 76.3 | 176.0 | 7.9 | 76.7 | ||||||||||||
Quarters Ended March 31: | ||||||||||||||||
2009 | 74.8 | 199.9 | 6.6 | 83.9 | ||||||||||||
2010 | 70.6 | % | 127.2 | % | 7.4 | % | 59.6 | % | ||||||||
Years Ended December 31: | 2009 | 2008 | 2007 | |||||||||
Reconciliation of consolidated ratio: | ||||||||||||
Provision for insured events of the current year | 82.6 | % | 85.0 | % | 62.0 | % | ||||||
Change in provision for insured events of prior years: | ||||||||||||
Due to asbestos and environmental | — | — | .1 | |||||||||
Due to all other coverages | (5.9 | ) | (3.2 | ) | (1.9 | ) | ||||||
Net (favorable) unfavorable development | (5.9 | ) | (3.2 | ) | (1.8 | ) | ||||||
Consolidated benefits and claim ratio | 76.7 | % | 81.8 | % | 60.2 | % | ||||||
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General Insurance Claims Ratios by Type of Coverage | ||||||||||||||||||||||||||||
Commercial | Inland | |||||||||||||||||||||||||||
Automobile | Marine | |||||||||||||||||||||||||||
All | (Mostly | Workers’ | Financial | and | General | |||||||||||||||||||||||
Coverages | Trucking) | Compensation | Indemnity | Property | Liability | Other | ||||||||||||||||||||||
Years Ended December 31: | ||||||||||||||||||||||||||||
2007 | 67.8 | % | 74.0 | % | 70.9 | % | 69.6 | % | 54.9 | % | 59.9 | % | 55.9 | % | ||||||||||||||
2008 | 73.0 | 76.1 | 69.4 | 95.0 | 60.5 | 64.4 | 53.9 | |||||||||||||||||||||
2009 | 76.3 | 71.5 | 74.9 | 117.8 | 63.0 | 65.6 | 60.1 | |||||||||||||||||||||
Quarters Ended March 31: | ||||||||||||||||||||||||||||
2009 | 74.8 | 74.9 | 69.6 | 120.0 | 57.8 | 59.2 | 58.2 | |||||||||||||||||||||
2010 | 70.6 | % | 76.5 | % | 72.2 | % | 85.4 | % | 49.7 | % | 52.4 | % | 71.6 | % | ||||||||||||||
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December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Gross | Net | Gross | Net | |||||||||||||
Asbestos: | ||||||||||||||||
Reserves at beginning of year | $ | 133.1 | $ | 108.6 | $ | 149.4 | $ | 121.9 | ||||||||
Loss and loss expenses incurred | (2.1 | ) | — | (4.9 | ) | (7.4 | ) | |||||||||
Claims and claim adjustment expenses paid | (8.9 | ) | (5.0 | ) | (11.4 | ) | (5.8 | ) | ||||||||
Reserves at end of year | 122.0 | 103.5 | 133.1 | 108.6 | ||||||||||||
Environmental: | ||||||||||||||||
Reserves at beginning of year | 39.3 | 36.4 | 41.1 | 36.1 | ||||||||||||
Loss and loss expenses incurred | 21.2 | 2.1 | 6.0 | 6.2 | ||||||||||||
Claims and claim adjustment expenses paid | (9.8 | ) | (5.1 | ) | (7.8 | ) | (5.9 | ) | ||||||||
Reserves at end of year | 50.7 | 33.4 | 39.3 | 36.4 | ||||||||||||
Total asbestos and environmental reserves | $ | 172.8 | $ | 136.9 | $ | 172.4 | $ | 145.0 | ||||||||
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Average Paid Claim | ||||||||||||||||
Amount(a) | Delinquency Ratio | |||||||||||||||
Traditional | Traditional | |||||||||||||||
Primary | Bulk | Primary | Bulk | |||||||||||||
Years Ended December 31: | ||||||||||||||||
2007 | $ | 32,214 | $ | 34,951 | 5.47 | % | 6.85 | % | ||||||||
2008 | 43,532 | 56,481 | 10.34 | 17.17 | ||||||||||||
2009 | 48,492 | 59,386 | 16.83 | 30.81 | ||||||||||||
Quarters Ended March 31: | ||||||||||||||||
2009 | 48,968 | 61,806 | 11.47 | 21.71 | ||||||||||||
2010 | $ | 47,874 | $ | 61,878 | 16.89 | % | 28.72 | % | ||||||||
(a) | Amounts are in whole dollars. |
Traditional Primary Delinquency Ratios for Top Ten States(b): | ||||||||||||||||||||||||||||||||||||||||
FL | TX | GA | IL | OH | CA | NJ | VA | NC | PA | |||||||||||||||||||||||||||||||
As of December 31: | ||||||||||||||||||||||||||||||||||||||||
2007 | 7.7 | % | 4.5 | % | 7.2 | % | 5.4 | % | 8.1 | % | 6.7 | % | 5.4 | % | 4.1 | % | 4.8 | % | 5.2 | % | ||||||||||||||||||||
2008 | 21.9 | 7.1 | 11.1 | 10.8 | 11.0 | 19.8 | 11.4 | 8.1 | 7.6 | 7.7 | ||||||||||||||||||||||||||||||
2009 | 34.1 | 10.6 | 18.8 | 19.5 | 16.4 | 30.5 | 21.1 | 13.9 | 12.3 | 11.6 | ||||||||||||||||||||||||||||||
As of March 31: | ||||||||||||||||||||||||||||||||||||||||
2009 | 25.4 | 6.9 | 12.1 | 12.2 | 11.4 | 23.7 | 13.9 | 9.3 | 8.0 | 8.2 | ||||||||||||||||||||||||||||||
2010 | 34.5 | % | 10.5 | % | 19.1 | % | 19.8 | % | 16.2 | % | 30.5 | % | 21.4 | % | 14.2 | % | 12.8 | % | 11.4 | % | ||||||||||||||||||||
Bulk Delinquency Ratios for Top Ten States(b): | ||||||||||||||||||||||||||||||||||||||||
FL | TX | GA | IL | OH | CA | NJ | NY | CO | AZ | |||||||||||||||||||||||||||||||
As of December 31: | ||||||||||||||||||||||||||||||||||||||||
2007 | 7.8 | % | 5.4 | % | 7.3 | % | 8.6 | % | 10.6 | % | 7.0 | % | 6.6 | % | 6.6 | % | 5.8 | % | 5.1 | % | ||||||||||||||||||||
2008 | 27.0 | 10.2 | 16.3 | 19.1 | 17.1 | 22.4 | 16.0 | 13.8 | 9.8 | 18.2 | ||||||||||||||||||||||||||||||
2009 | 46.5 | 16.3 | 27.6 | 35.7 | 23.4 | 41.3 | 33.3 | 26.8 | 17.0 | 37.5 | ||||||||||||||||||||||||||||||
As of March 31: | ||||||||||||||||||||||||||||||||||||||||
2009 | 34.3 | 12.2 | 19.5 | 22.8 | 19.1 | 30.0 | 22.0 | 18.0 | 11.6 | 25.1 | ||||||||||||||||||||||||||||||
2010 | 42.9 | % | 16.6 | % | 27.6 | % | 34.9 | % | 23.7 | % | 35.1 | % | 34.2 | % | 27.4 | % | 17.3 | % | 33.1 | % | ||||||||||||||||||||
Total Delinquency Ratios for Top Ten States (includes “other” business)(b): | ||||||||||||||||||||||||||||||||||||||||
FL | TX | GA | IL | OH | CA | NJ | NY | NC | PA | |||||||||||||||||||||||||||||||
As of December 31: | ||||||||||||||||||||||||||||||||||||||||
2007 | 6.9 | % | 4.5 | % | 6.7 | % | 5.0 | % | 8.0 | % | 5.5 | % | 5.5 | % | 5.4 | % | 4.1 | % | 5.1 | % | ||||||||||||||||||||
2008 | 21.3 | 7.2 | 11.2 | 10.2 | 11.4 | 17.2 | 12.1 | 10.8 | 6.8 | 8.1 | ||||||||||||||||||||||||||||||
2009 | 36.4 | 11.2 | 19.4 | 20.5 | 17.2 | 33.9 | 24.1 | 20.1 | 11.5 | 12.9 | ||||||||||||||||||||||||||||||
As of March 31: | ||||||||||||||||||||||||||||||||||||||||
2009 | 25.9 | 7.5 | 12.5 | 11.9 | 12.3 | 23.1 | 15.5 | 13.2 | 7.4 | 9.0 | ||||||||||||||||||||||||||||||
2010 | 35.1 | % | 11.1 | % | 19.4 | % | 20.8 | % | 17.1 | % | 31.1 | % | 24.1 | % | 20.4 | % | 12.0 | % | 12.7 | % | ||||||||||||||||||||
(b) | As determined by risk in force as of March 31, 2010, these 10 states represent approximately 49.9%, 59.1%, and 50.2%, of traditional primary, bulk, and total risk in force, respectively. |
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General | Mortgage | Title | Consolidated | |||||||||||||
Years Ended December 31: | ||||||||||||||||
2007 | 24.1 | % | 17.7 | % | 98.1 | % | 41.3 | % | ||||||||
2008 | 24.2 | 15.7 | 103.6 | 39.1 | ||||||||||||
2009 | 25.8 | 12.6 | 93.8 | 41.8 | ||||||||||||
Quarters Ended March 31: | ||||||||||||||||
2009 | 25.6 | 13.7 | 102.9 | 39.6 | ||||||||||||
2010 | 26.7 | % | 13.5 | % | 98.5 | % | 47.4 | % | ||||||||
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General | Mortgage | Title | Consolidated | |||||||||||||
Years Ended December 31: | ||||||||||||||||
2007 | 91.9 | % | 136.5 | % | 104.7 | % | 101.5 | % | ||||||||
2008 | 97.2 | 215.0 | 110.6 | 120.9 | ||||||||||||
2009 | 102.1 | 188.6 | 101.7 | 118.5 | ||||||||||||
Quarters Ended March 31: | ||||||||||||||||
2009 | 100.4 | 213.6 | 109.5 | 123.5 | ||||||||||||
2010 | 97.3 | % | 140.7 | % | 105.9 | % | 107.0 | % | ||||||||
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ABOUT MARKET RISK
($ in Millions)
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Estimated Fair Value | ||||||||||
Estimated | Hypothetical Change in | After Hypothetical Change in | ||||||||
Fair Value | Interest Rates or S&P 500 | Interest Rates or S&P 500 | ||||||||
Interest Rate Risk: | ||||||||||
Fixed Maturities | $ | 8,326.8 | 100 basis point rate increase | $ | 8,013.7 | |||||
200 basis point rate increase | 7,700.6 | |||||||||
100 basis point rate decrease | 8,639.9 | |||||||||
200 basis point rate decrease | $ | 8,953.0 | ||||||||
Equity Price Risk: | ||||||||||
Equity Securities | $ | 502.9 | 10% increase in the S&P 500 | $ | 569.8 | |||||
20% increase in the S&P 500 | 636.7 | |||||||||
10% decline in the S&P 500 | 436.0 | |||||||||
20% decline in the S&P 500 | $ | 369.1 |
Positions with Old Republic, Business Experience and | ||||||
Name | Age | Qualifications | ||||
CLASS 1(Term expires in 2012) | ||||||
Harrington Bischof | 75 | Director since 1997. President of Pandora Capital Corporation since 1996. Formerly Senior Advisor with Prudential Securities, Inc. and prior to that a Senior investment banker with the firms of Merrill, Lynch & Co. and White, Weld & Co. His long business, investment banking, and international finance experience are of significant value in Old Republic’s governance. | ||||
Leo E. Knight, Jr. | 65 | Director of Old Republic since 2006, and of several Old Republic subsidiaries since 1999. A CPA by training, he retired in 2006 as Chairman and Chief Executive Officer of National City Mortgage Company, Dayton, Ohio, following a thirty-two year career. Mr. Knight is also a director of Merscorp, Inc. He brings significant business experience in mortgage lending and the mortgage insurance industry and their risk factors to Old Republic’s Board. |
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Positions with Old Republic, Business Experience and | ||||||
Name | Age | Qualifications | ||||
Charles F. Titterton | 68 | Director since 2004. Formerly Director — Insurance Group with Standard & Poor’s Corp. until 2003. He brings significant business experience and knowledge of the risk factors connected with the insurance industry by virtue of a long career as a lending officer with a major banking institution and with the aforementioned rating agency. | ||||
Steven R. Walker | 65 | Director since 2006. Formerly Senior Counsel and Partner with Leland, Parachini, Steinberg, Matzger & Melnick, LLP, attorneys, San Francisco, California. He brings significant experience to Old Republic’s Board as both an attorney and a business manager during a long career focused on the title insurance industry. | ||||
CLASS 2(Term expires in 2013) | ||||||
Jimmy A. Dew | 70 | Director since 1980. Vice Chairman of Old Republic’s subsidiary, Republic Mortgage Insurance Company (“RMIC”), of which he was a co-founder in 1973. His knowledge of RMIC gained in an executive capacity since its founding and his long service on Old Republic’s board make him fully conversant with the insurance industry and its risk factors. | ||||
John M. Dixon | 70 | Director since 2003. Formerly Chief Executive Partner with the law firm of Chapman and Cutler, Chicago, Illinois until his retirement in 2002. His qualifications include his extensive background as an attorney and his knowledge of corporate law and the risk factors of corporations like Old Republic. | ||||
Dennis P. Van Mieghem | 70 | Director since 2004. A CPA by training, he was the Partner in charge of the National Insurance Tax Practice of the accounting firm of KPMG LLP until his retirement in 1998. With this background he brings significant experience and knowledge of the insurance industry and its risk factors to service on Old Republic’s Board. | ||||
CLASS 3(Term expires in 2011) | ||||||
William A. Simpson | 68 | Director since 1980. Chairman of Old Republic’s subsidiary, Republic Mortgage Insurance Company (“RMIC”) of which he was a co-founder in 1973. His knowledge of RMIC’s business gained in an executive capacity since its founding, and his long service on Old Republic’s Board make him fully conversant with the insurance industry and its risk factors. | ||||
Arnold L. Steiner | 72 | Director since 1974. Retired for more than the past five years from Steiner Bank, Birmingham, Alabama of which he was President and a substantial owner. He brings long and significant experience in financial businesses and has extensive knowledge of Old Republic and its risk factors. |
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Positions with Old Republic, Business Experience and | ||||||
Name | Age | Qualifications | ||||
Fredricka Taubitz | 66 | Director since 2003. A CPA by training, she was until 2000, Executive Vice President and Chief Financial Officer of Zenith National Insurance Corp. Until 1985 she had been a Partner with the accounting firm of Coopers & Lybrand (now PricewaterhouseCoopers LLP). During her long professional career she has gained significant experience in, and knowledge of, the business and the risk factors associated with the insurance industry. | ||||
Aldo C. Zucaro | 71 | Director since 1976. Chairman of the Board and Chief Executive Officer of Old Republic and various subsidiaries for more than the past five years. A CPA by training, he brings a significant background as a former insurance specialist partner with Coopers & Lybrand (now PricewaterhouseCoopers LLP), and long term experience with the insurance industry in general, and Old Republic in particular since 1970. |
Name | Age | Position | ||||
Charles S. Boone | 57 | Senior Vice President — Investments and Treasurer since August, 2001. | ||||
James A. Kellogg | 59 | Executive Vice Chairman since July 1, 2010. President and Chief Operating Officer since July, 2006 and President of Old Republic Insurance Company since October, 2002. | ||||
Spencer LeRoy, III | 64 | Senior Vice President, Secretary and General Counsel since 1992. | ||||
Karl W. Mueller | 51 | Senior Vice President and Chief Financial Officer since October, 2004. | ||||
Christopher S. Nard | 47 | President and Chief Operating Officer since July 1, 2010. Senior Vice President — Mortgage Guaranty since May, 2005. President and Chief Executive Officer of Republic Mortgage Insurance Companies since May, 2005. | ||||
R. Scott Rager | 61 | Senior Vice President — General Insurance and President and Chief Operating Officer of Old Republic General Insurance Companies since July, 2006. | ||||
Rande K. Yeager | 61 | Senior Vice President — Title Insurance since March, 2003; President and Chief Executive Officer of Old Republic Title Insurance Companies since March, 2002. | ||||
Aldo C. Zucaro | 71 | Chairman of the Board, Chief Executive Officer, and Director since 1993, 1990 and 1976, respectively. |
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• | The investors’ capital which enables and underpins the insurance risk taking; | |
• | The intellectual capital, know-how, and business relationships possessed by employees at various levels of the enterprise; and | |
• | Old Republic’s good name and reputation, cultivated over its 86-plus year history, and the even longer history of some of its major insurance subsidiaries. |
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• | Lines of business responsibility, | |
• | Enterprise functions, and | |
• | Internal audit and peer reviews. |
• | Ascertain that strategies and policies are in place to encourage the growth of consolidated earnings and shareholders equity over the long haul, while increasing Old Republic’s regular dividend payout; | |
• | Ascertain that Old Republic’s business is managed in a sound and conservative manner that takes into account the public interest vested in its insurance subsidiaries; | |
• | Provide advice and counsel to management on business opportunities and strategies; | |
• | Review and approve major corporate transactions; | |
• | Monitor the adequacy of Old Republic’s internal control and financial reporting systems and practices to safeguard assets and to comply with applicable laws and regulations; |
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• | Ascertain that appropriate policies and practices are in place for managing the identified risks faced by the enterprise; | |
• | Evaluate periodically the performance of the Chairman and Chief Executive Officer in the context of Old Republic’s Mission and performance metrics; | |
• | Review and approve senior management’s base and incentive compensation taking into account the business’ performance gauged by its return on equity and growth of operating earnings; | |
• | Review periodically senior management development and succession plans both at corporate and operating subsidiary levels; | |
• | Select and recommend for election by the shareholders candidates deemed qualified for Board service; and | |
• | Select and retain independent auditors for the principal purpose of expressing their opinion on the annual financial statements and internal controls over financial reporting of Old Republic and its subsidiaries. |
• | Satisfy the requirements for director independence; | |
• | Are, or have been, senior executives of businesses or professional organizations; | |
• | Have significant business, financial, accountingand/or legal backgrounds useful to Old Republic’s operations, markets and customer services. |
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2009 Directors Compensation | ||||||||||||||||
(c) | ||||||||||||||||
(b) | Non-Qualified | |||||||||||||||
Fees Earned | Deferred | (d) | ||||||||||||||
(a) | Or Paid in | Compensation | All Other | (e) | ||||||||||||
Name | Cash | Earnings | Compensation | Total | ||||||||||||
Harrington Bischof | $ | 126,250 | — | — | $ | 126,250 | ||||||||||
Jimmy A. Dew | 176,000 | (1) | 23,058 | (2) | $ | 811,207 | (4) | 1,010,265 | ||||||||
John M. Dixon | 130,000 | — | — | 130,000 | ||||||||||||
Leo E. Knight, Jr. | 115,000 | — | — | 115,000 | ||||||||||||
John W. Popp | 135,000 | 7,336 | (3) | — | 142,336 | |||||||||||
William A. Simpson | 264,000 | (1) | 32,773 | (2) | 465,307 | (4) | 762,080 | |||||||||
Arnold L. Steiner | 130,000 | — | — | 130,000 | ||||||||||||
Fredricka Taubitz | 115,000 | — | — | 115,000 | ||||||||||||
Charles F. Titterton | 118,750 | — | — | 118,750 | ||||||||||||
Dennis Van Mieghem | 115,000 | — | — | 115,000 | ||||||||||||
Steven R. Walker | 110,000 | — | — | 110,000 |
(1) | Messrs. Dew and Simpson were not paid any director fees during 2009 but were paid $176,000 and $264,000, respectively, as consultants of RMIC as they continued as non executive Vice Chairman and Chairman of RMIC. | |
(2) | During 2009, Messrs. Dew and Simpson were credited with $23,058 and $32,773, respectively, for interest on deferred balances held under the RMIC Key Employee Performance Recognition Plan. | |
(3) | During 2009, Mr. Popp was credited with interest on the deferred balance of compensation due him from a subsidiary of Old Republic for work done for that subsidiary many years ago. Mr. Popp retired from the Board on May 28, 2010. | |
(4) | Messrs. Dew and Simpson were paid $811,207 and $465,307, respectively, as one time lump sum settlements of previously deferred benefits under the RMIC Supplemental Retirement Plan during 2009. These payments resulted from their retirement at year end 2008. |
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• | Vision and planning for Old Republic’s future, principally on a long-term basis; | |
• | Strategies established and implemented to realize these plans; | |
• | Leadership qualities; | |
• | Judgment in making decisions regarding plans and general management of Old Republic’s affairs; | |
• | Commitment to achieving goals, especially when faced with adversity; | |
• | Ability in setting objectives and promoting the best interests of Old Republic’s shareholders, the beneficiaries of its subsidiaries’ insurance policies, and those of other stakeholders; | |
• | Adherence to high ethical standards that promote and protect Old Republic’s good name and reputation. |
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• | Annual Salary | |
• | Incentive awards including both cash and deferred amounts, based on earnings and return on equity achievements of Old Republic and its subsidiaries over multi-year periods, and in certain cases, bonuses based also upon their individual performances. | |
• | Stock option awards; and | |
• | Miscellaneous other benefits such as pensions and health insurance programs. |
Segmented Operating Results | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
($ in Millions) | ||||||||||||||||||||
Pretax operating income (loss)(a): | ||||||||||||||||||||
General insurance | $ | 200.1 | $ | 294.3 | $ | 418.0 | $ | 401.6 | $ | 350.0 | ||||||||||
Mortgage guaranty | (486.4 | ) | (594.3 | ) | (110.4 | ) | 228.4 | 243.7 | ||||||||||||
Title insurance | 2.1 | (46.3 | ) | (14.7 | ) | 31.0 | 88.7 | |||||||||||||
Corporate and other(b) | 4.0 | 13.5 | 15.1 | — | (.1 | ) | ||||||||||||||
Total | (279.9 | ) | (332.7 | ) | 308.0 | 661.1 | 682.4 | |||||||||||||
Income taxes (credits) on operating income (loss) | (122.7 | ) | (144.6 | ) | 81.3 | 208.6 | 173.2 | |||||||||||||
Net operating income (loss)(a) | $ | (157.2 | ) | $ | (188.1 | ) | $ | 226.7 | $ | 452.4 | $ | 509.1 | ||||||||
(a) | Operating income is a non-GAAP reflection of Old Republic’s business results in as much as it excludes investment gains or losses from sales of securities or impairments in the value of portfolio securities. | |
(b) | Represents amounts for Old Republic’s holding company parent, minor corporate services subsidiaries, and a small life and health insurance operation. |
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Summary Compensation Table | ||||||||||||||||||||||||||||
(f) | ||||||||||||||||||||||||||||
Change in | ||||||||||||||||||||||||||||
(e) | Pension Value | |||||||||||||||||||||||||||
Value of | and Nonqualified | |||||||||||||||||||||||||||
(a) | Stock | Deferred | (g) | (h) | ||||||||||||||||||||||||
Name and | (b) | (c) | (d) | Option | Compensation | All Other(5) | Total | |||||||||||||||||||||
Principal Positions | Year | Salary(1) | Bonus(2) | Awards(3) | Earnings(4) | Compensation | ($) | |||||||||||||||||||||
Aldo C. Zucaro | 2009 | $ | 776,146 | $ | 40,748 | $ | — | $ | 183,129 | $ | 22,577 | $ | 1,022,600 | |||||||||||||||
Chairman & Chief | 2008 | 776,146 | 37,513 | — | 50,547 | 16,320 | 880,526 | |||||||||||||||||||||
Executive Officer | 2007 | 767,813 | 38,090 | 936,000 | 343,737 | 17,719 | 2,103,359 | |||||||||||||||||||||
2006 | 741,146 | 726,019 | 1,528,800 | 283,680 | 20,237 | 3,299,882 | ||||||||||||||||||||||
2005 | 711,279 | 1,096,929 | 486,990 | — | 25,313 | 2,320,511 | ||||||||||||||||||||||
Karl W. Mueller | 2009 | 385,000 | 113,446 | 13,116 | 24,886 | 7,216 | 543,664 | |||||||||||||||||||||
Senior Vice President & | 2008 | 370,833 | 103,724 | 38,000 | 15,876 | 7,807 | 536,240 | |||||||||||||||||||||
Chief Financial Officer | 2007 | 358,333 | 190,927 | 177,840 | 11,232 | 7,527 | 745,859 | |||||||||||||||||||||
2006 | 341,667 | 266,934 | 191,100 | 15,044 | 9,941 | 824,686 | ||||||||||||||||||||||
2005 | 325,000 | 253,275 | 162,330 | — | 9,018 | 749,623 | ||||||||||||||||||||||
James A. Kellogg | 2009 | 476,034 | 18,821 | — | 156,585 | 23,031 | 674,471 | |||||||||||||||||||||
President & Chief | 2008 | 472,400 | 18,273 | — | 79,904 | 20,246 | 590,823 | |||||||||||||||||||||
Operating Officer | 2007 | 467,400 | 18,632 | 397,800 | (5,968 | ) | 13,402 | 891,266 | ||||||||||||||||||||
2006 | 413,233 | 449,186 | 327,600 | 104,700 | 17,737 | 1,312,456 | ||||||||||||||||||||||
2005 | 357,400 | 421,948 | 162,330 | — | 15,766 | 957,444 | ||||||||||||||||||||||
Christopher S. Nard(6) | 2009 | 395,000 | 31,916 | 52,464 | — | 13,365 | (7) | 492,745 | ||||||||||||||||||||
Senior Vice President — | 2008 | 375,333 | 31,209 | 152,000 | — | 17,106 | (7) | 575,648 | ||||||||||||||||||||
Mortgage Guaranty | 2007 | 351,833 | 31,702 | 280,000 | — | 33,521 | (7) | 697,056 | ||||||||||||||||||||
2006 | 343,500 | 784,135 | 409,500 | — | 36,138 | (7) | 1,573,273 | |||||||||||||||||||||
2005 | 305,167 | 757,856 | 229,967 | — | 29,878 | (7) | 1,267,397 | |||||||||||||||||||||
R. Scott Rager(6) | 2009 | 433,667 | 386,152 | 8,744 | — | 5,364 | 833,927 | |||||||||||||||||||||
Senior Vice President — | 2008 | 420,000 | 498,629 | 57,000 | — | 5,364 | 980,993 | |||||||||||||||||||||
General Insurance | 2007 | 374,500 | 486,440 | 257,400 | — | 487,109 | (8) | 1,605,449 | ||||||||||||||||||||
2006 | 294,583 | 430,770 | 256,815 | — | 5,982 | 988,150 | ||||||||||||||||||||||
Rande K. Yeager | 2009 | 357,167 | — | 17,488 | 107,229 | 10,951 | 492,835 | |||||||||||||||||||||
Senior Vice President — | 2008 | 316,063 | — | 45,600 | 96,186 | 10,967 | 468,816 | |||||||||||||||||||||
Title Insurance | 2007 | 299,383 | — | 23,400 | 26,509 | 9,550 | 358,842 | |||||||||||||||||||||
2006 | 284,450 | 500,000 | 81,900 | 74,460 | 10,260 | 951,070 | ||||||||||||||||||||||
2005 | 265,483 | 620,000 | 59,521 | — | 10,710 | 955,714 |
(1) | Since January 1, 2007, no employee of Old Republic or any of its subsidiaries have received any director fees for attending Board meetings of Old Republic or any of its subsidiaries. In the above table, each officer’s salary includes the non material amount of director fees for 2006 and 2005. | |
(2) | Includes the combined cash and deferred incentive compensation awards granted under Old Republic’s performance recognition plans or similar plans maintained by subsidiaries of Old Republic. In this table, both the cash and deferred portions are attributed to the year on which the award was based, even though the award was granted in the following calendar year. Prior to 2007, these awards were split 50% each into cash and deferred amounts, except as to Mr. Yeager whose awards were and continue to be 100% cash. Beginning in 2007, the first $25,000 was paid in cash and the balance was split 50% each into cash and deferred amounts. The deferred amounts included in this column are usually not payable before the person retires at 55 years of age or later. Beginning in 2007, the deferred portions accrue interest for awards made in 2005 and subsequent. For awards made prior to 2004 an interest equivalent multiplier may apply. The deferred amounts included in this column are shown without a present value discount but show the interest accrual on the deferred balances for the |
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year. No incentive compensation awards were granted in 2007, 2008 or 2009 under Old Republic’s and its subsidiaries Key Employee Performance Recognition Plans. These plans have been suspended. However, certain executive officers and other employees have been granted bonus awards based on Old Republic’s segmented results as well as on their individual performance. The 2009 and 2008 bonus awards shown for Messrs. Mueller and Rager represent such awards and interest ($13,446 and $12,924 and $51,152 and $23,629, respectively) on deferred incentive compensation plan balances outstanding at December 31, 2009. The 2009, 2008 and 2007 amounts shown for Messrs. Zucaro, Kellogg and Nard represent only interest on their deferred incentive compensation plan balances. | ||
(3) | The value of options is calculated pursuant to the Black-Scholes model. The option values represent the estimated present value as of the date options were granted. Accordingly, the option awards included under this column were granted in the years shown and reflect, among other factors previously noted, an evaluation of earnings trends and returns on equity for prior years. The values shown for Messrs Mueller, Kellogg and Nard have been restated for 2008 and prior years to reflect changes in SEC rules regarding the presentation of such values. | |
The significant facts and assumptions incorporated in the Black-Scholes model used to estimate the value of the options include the following: | ||
a) Options are issued with an exercise price equal to 100% of the per share value at the close of trading (the “Fair Market Value”) of Common Stock on the business day immediately preceding the date of grant (the “Grant Date”). | ||
b) The term of each option is 10 years (unless such terms are otherwise shortened or forfeited due to termination of employment) but it is assumed that these executives would hold these options for 8 years. | ||
c) Specific interest rates are used for valuing the awards. Such rates are predicated on the interest rate on U.S. Treasury securities on the date of grant with a maturity date corresponding to that of the expected option life. | ||
d) A stock price volatility factor is utilized in valuing the option awards. This factor is calculated using daily stock prices for the period prior to the grant date corresponding with the expected option life. | ||
e) Expected annual dividend yields ranging between 6.5% and 3.5% are used in the calculation of the awards. | ||
The ultimate value of the options will depend on the future market price of Old Republic’s Common Stock which cannot be forecasted with reasonable accuracy. The actual value, if any, that an optionee may realize upon exercise of an option will depend on the excess of the market value over the exercise price on the date the option is exercised. |
The values attributed to options granted in the years 2005 to 2008 have been negated based on the actual market value of Old Republic’s stock through August 2, 2010. |
(4) | Represents the aggregate change in the actuarial present value of the accumulated benefits under all defined benefit and actuarial pension plans, including supplemental plans. Old Republic does not have any non-qualified deferred compensation plans that credit above market or preferential earnings to participants. No information is supplied for 2005 as that information is unavailable. | |
(5) | Includes all minor amounts covering Old Republic’s matching contribution to the officers’ ESSOP account; the value of Old Republic’s group term life insurance plan treated as income; the value of the personal use of a vehicle supplied for company business; and the personal value of meals and club dues incurred for company business. | |
(6) | Mr. Nard assumed additional responsibilities as an executive officer of Old Republic effective June 1, 2005; Mr. Rager assumed additional responsibilities as an executive officer of Old Republic and its General Insurance Companies effective June 1, 2006. | |
(7) | Includes the vested amounts accrued under the RMIC Profit Sharing Plan, of which their was none in 2008 and 2009, and a minor amount attributed to a health program available to all RMIC employees. | |
(8) | Includes a $400,000 relocation bonus and $84,362 in relocation expenses paid to Mr. Rager in connection with his move to Old Republic’s Chicago executive offices in 2007. |
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• | Business size and complexity of the operations with which the executive is associated; | |
• | The executive’s level of responsibility and experience; | |
• | The success of the executive’s business unit and evaluation of his or her contribution to that success. |
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Nonqualified Deferred Compensation | ||||||||||||
Aggregate | ||||||||||||
Deferred | ||||||||||||
Old Republic’s | Aggregate | Balance as of | ||||||||||
Contributions | Earnings | December 31, | ||||||||||
Name | 2009 | 2009 | 2009 | |||||||||
Aldo C. Zucaro | — | $ | 40,748 | $ | 6,658,040 | |||||||
Karl W. Mueller | — | 13,446 | 479,259 | |||||||||
James A. Kellogg | — | 18,821 | 1,487,647 | |||||||||
Christopher S. Nard | — | 31,916 | 2,233,336 | |||||||||
R. Scott Rager | $ | 155,000 | 51,152 | 1,994,675 | ||||||||
Rande K. Yeager | — | — | — | |||||||||
• | the achievements of the individual, | |
• | the overall performance of Old Republic, | |
• | the anticipated contributions of awardees to Old Republic’s future success. |
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2009 Stock Option Grants | ||||||||||||||||
All Other | ||||||||||||||||
Option Awards: | Exercise or | Grant Date | ||||||||||||||
Grant | Number of Securities | Base Price Of | Fair Value of | |||||||||||||
Name | Date | Underlying Options | Option Awards | Option Award | ||||||||||||
Aldo C. Zucaro | — | — | — | — | ||||||||||||
Karl W. Mueller | 3/25/09 | 15,000 | $ | 10.48 | $ | 13,116 | ||||||||||
James A. Kellogg | — | — | — | — | ||||||||||||
Christopher S. Nard | 3/25/09 | 60,000 | 10.48 | 52,464 | ||||||||||||
R. Scott Rager | 3/25/09 | 10,000 | 10.48 | 8,744 | ||||||||||||
Rande K. Yeager | 3/25/09 | 20,000 | 10.48 | 17,488 |
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Equity Compensation Plan Status as of Year End 2009 | ||||||||||||
Number of | ||||||||||||
Securities | ||||||||||||
Remaining | ||||||||||||
Number of | Available for | |||||||||||
Securities to be | Future Issuance | |||||||||||
Issued Upon Exercise | Weighted-Average | Under Equity | ||||||||||
of Outstanding | Exercise Price of | Compensation Plans | ||||||||||
Options, Warrants | Outstanding Options, | (Excluding Securities | ||||||||||
Plan Category | and Rights | Warrants and Rights | Reflected in Column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 15,781,176 | $ | 17.49 | 5,880,514 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 15,781,176 | $ | 17.49 | 5,880,514 | ||||||||
Outstanding Equity Awards at Year End 2009 | ||||||||||||||||
Number of Securities | ||||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | Option | |||||||||||||
Options | Options | Exercise | Expiration | |||||||||||||
Name | Exercisable | Unexercisable | Price | Date | ||||||||||||
Aldo C. Zucaro | 300,000 | — | $ | 14.36 | 03/21/11 | |||||||||||
318,750 | — | 16.86 | 03/20/12 | |||||||||||||
346,875 | — | 14.37 | 03/19/13 | |||||||||||||
346,875 | — | 19.32 | 03/09/14 | |||||||||||||
112,500 | — | 18.41 | 04/11/15 | |||||||||||||
196,000 | 84,000 | 21.48 | 05/26/16 | |||||||||||||
90,000 | 110,000 | 21.77 | 03/13/17 | |||||||||||||
— | — | 12.95 | 03/18/18 | |||||||||||||
— | — | 10.48 | 03/25/19 | |||||||||||||
Karl W. Mueller | 37,500 | — | 20.02 | 03/09/14 | ||||||||||||
12,500 | — | 18.41 | 04/11/15 | |||||||||||||
24,500 | 10,500 | 21.48 | 05/26/16 | |||||||||||||
17,100 | 20,900 | 21.77 | 03/13/17 | |||||||||||||
6,250 | 18,750 | 12.95 | 03/18/18 | |||||||||||||
1,500 | 13,500 | 10.48 | 03/25/19 | |||||||||||||
James A. Kellogg | 4,219 | — | 6.40 | 03/22/10 | (*) | |||||||||||
6,563 | — | 14.36 | 03/21/11 | |||||||||||||
7,500 | — | 16.86 | 03/20/12 | |||||||||||||
9,375 | — | 14.37 | 03/19/13 | |||||||||||||
25,000 | — | 19.32 | 03/09/14 | |||||||||||||
37,500 | — | 18.41 | 04/11/15 | |||||||||||||
42,000 | 18,000 | 21.48 | 05/26/16 | |||||||||||||
38,250 | 46,750 | 21.77 | 03/13/17 | |||||||||||||
— | — | 12.95 | 03/18/18 | |||||||||||||
— | — | 10.48 | 03/25/19 | |||||||||||||
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Outstanding Equity Awards at Year End 2009 | ||||||||||||||||
Number of Securities | ||||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | Option | |||||||||||||
Options | Options | Exercise | Expiration | |||||||||||||
Name | Exercisable | Unexercisable | Price | Date | ||||||||||||
Christopher S. Nard | 28,125 | — | 6.40 | 03/22/10 | (*) | |||||||||||
65,625 | — | 14.36 | 03/21/11 | |||||||||||||
56,250 | — | 16.86 | 03/20/12 | |||||||||||||
75,000 | — | 14.37 | 03/19/13 | |||||||||||||
75,000 | — | 19.32 | 03/09/14 | |||||||||||||
53,125 | — | 18.41 | 04/11/15 | |||||||||||||
52,500 | 22,500 | 21.48 | 05/26/16 | |||||||||||||
27,000 | 33,000 | 21.77 | 03/13/17 | |||||||||||||
25,000 | 75,000 | 12.95 | 03/18/18 | |||||||||||||
6,000 | 54,000 | 10.48 | 03/25/19 | |||||||||||||
R. Scott Rager | 15,000 | — | 16.86 | 03/20/12 | ||||||||||||
27,500 | — | 19.32 | 03/09/14 | |||||||||||||
28,750 | — | 18.41 | 04/11/15 | |||||||||||||
32,900 | 14,100 | 21.48 | 05/26/16 | |||||||||||||
24,750 | 30,250 | 21.77 | 03/13/17 | |||||||||||||
9,375 | 28,125 | 12.95 | 03/18/18 | |||||||||||||
1,000 | 9,000 | 10.48 | 03/25/19 | |||||||||||||
Rande K. Yeager | 14,063 | — | 16.86 | 03/20/12 | ||||||||||||
18,750 | — | 19.32 | 03/09/14 | |||||||||||||
13,750 | — | 18.41 | 04/11/15 | |||||||||||||
10,500 | 4,500 | 21.48 | 05/26/16 | |||||||||||||
2,250 | 2,750 | 21.77 | 03/13/17 | |||||||||||||
7,500 | 22,500 | 12.95 | 03/18/18 | |||||||||||||
2,000 | 18,000 | 10.48 | 03/25/19 | |||||||||||||
(*) | These options were exercised or lapsed during March 2010. |
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Pension Benefits | ||||||||||||||
Present Value of | ||||||||||||||
Number of Years | Accumulated | Payments During | ||||||||||||
Name | Plan Name | Credited Service | Benefit(1) | Last Fiscal Year | ||||||||||
Aldo C. Zucaro | ORI Employees Retirement Plan | 32.4 | $ | 1,306,188 | — | |||||||||
ORI Excess Benefit Plan | 32.4 | 2,863,938 | — | |||||||||||
Karl W. Mueller | ORI Employees Retirement Plan | 4.3 | 70,286 | — | ||||||||||
James A. Kellogg | ORI Employees Retirement Plan | 32.8 | 866,018 | — | ||||||||||
Christopher S. Nard | None | — | — | — | ||||||||||
R. Scott Rager | None | — | — | — | ||||||||||
Rande K. Yeager | ORNTG Pension Plan | 22.6 | 711,605 | — | �� |
(1) | The present value of accumulated benefits payable following assumed retirement is calculated using interest and mortality assumptions consistent with those used for financial reporting purposes with respect to the companies’ audited financial statements. No discount is assumed for separation prior to retirement due to death, disability or termination of employment. The amount shown is based upon accrued service through year end 2009. |
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CEO of Old Republic | 6 times | |||
President of Old Republic | 4 times | |||
Certain other senior officers of Old Republic and its subsidiaries | 1.5 times | |||
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Amount and | Percent of | |||||||||||||
Nature of | Class | |||||||||||||
Beneficial | Percent of | Following the | ||||||||||||
Title of Class | Name of Beneficial Owner | Ownership | Class(*) | Merger(*) | ||||||||||
Common Stock | ||||||||||||||
Shareholders’ beneficial ownership of more than 5% of the Common Stock | Franklin Resources, Inc. One Franklin Parkway San Mateo, California94403-1906 | 19,378,056 | (1) | 8.1 | 7.4 | |||||||||
JP Morgan Chase & Co. 270 Park Avenue New York, New York 10017 | 18,974,881 | (1) | 7.9 | 7.3 | ||||||||||
FMR LLC 82 Devonshire Street Boston, Massachusetts 02109 | 17,303,458 | (1) | 7.1 | 6.6 | ||||||||||
Old Republic International Corporation Employees Savings and Stock Ownership Trust 307 N. Michigan Avenue Chicago, Illinois 60601 | 15,446,633 | (2) | 6.4 | 5.9 | ||||||||||
Black Rock, Inc. 40 East 52nd Street New York, New York 10022 | 13,548,415 | (1) | 5.6 | 5.6 | (12) | |||||||||
Franklin Mutual Advisors, LLC. 101 John F Kennedy Parkway Short Hills, New Jersey 07078 | 12,747,567 | (1) | 5.3 | 4.9 |
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Shares | Other | |||||||||||||||||||||||||
Shares | Held by | Shares | Percent | |||||||||||||||||||||||
Subject | Employee | Beneficially | of Class | |||||||||||||||||||||||
Name of | to Stock | Plans | Owned | Percent | Following the | |||||||||||||||||||||
Common Stock | Beneficial Owner | Options(*) | (*)(2)(3) | (*)(4) | Total | of Class(*) | Merger(*) | |||||||||||||||||||
Directors’ and | Harrington Bischof | — | — | 33,260 | 33,260 | (5) | ** | ** | ||||||||||||||||||
executive officers’ | Jimmy A. Dew | 497,500 | 197,219 | 661,337 | 1,320,556 | (6) | 0.5 | 0.5 | ||||||||||||||||||
beneficial ownership | John M. Dixon | — | — | 18,199 | 18,199 | ** | ** | |||||||||||||||||||
James A. Kellogg | 166,188 | 43,239 | 388,462 | 597,889 | 0.2 | 0.2 | ||||||||||||||||||||
Leo E. Knight, Jr. | — | — | 23,181 | 23,181 | ** | ** | ||||||||||||||||||||
Karl W. Mueller | 99,350 | 3,209 | 6,242 | 108,801 | ** | ** | ||||||||||||||||||||
Christopher S. Nard | 435,500 | 10,978 | 24,170 | 470,648 | 0.2 | 0.2 | ||||||||||||||||||||
R. Scott Rager | 139,275 | 39,692 | 2,670 | 181,637 | ** | ** | ||||||||||||||||||||
William A. Simpson | 602,188 | — | 548,040 | 1,150,228 | (7) | 0.5 | 0.4 | |||||||||||||||||||
Arnold L. Steiner | — | — | 826,438 | 826,438 | (8) | 0.3 | 0.3 | |||||||||||||||||||
Fredricka Taubitz | — | — | 22,681 | 22,681 | ** | ** | ||||||||||||||||||||
Charles F. Titterton | — | — | 23,187 | 23,187 | (9) | ** | ** | |||||||||||||||||||
Dennis Van Mieghem | — | — | 14,050 | 14,050 | (10) | ** | ** | |||||||||||||||||||
Steven R. Walker | — | — | 34,340 | 34,340 | (11) | ** | ** | |||||||||||||||||||
Rande K. Yeager | 68,813 | 22,611 | 9,688 | 101,112 | ** | ** | ||||||||||||||||||||
Aldo C. Zucaro | 1,711,000 | 408,574 | 1,063,101 | 3,182,675 | 1.3 | 1.2 | ||||||||||||||||||||
executive officers and directors, as a group(18) | 3,796,189 | 764,078 | 3,714,664 | 8,274,931 | 3.3 | 3.1 |
* | Calculated pursuant toRule 13d-3(d) of the Securities Exchange Act of 1934. Unless otherwise stated below, each such person has sole voting and investment power with respect to all such shares. UnderRule 13d-3(d), shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but are not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. | |
** | Less than one-tenth of one percent. | |
(1) | Reflects the number of shares shown in the most recent Schedule 13G filings with the Securities and Exchange Commission through February 15, 2010. Franklin Resources, Inc. reports that Franklin Advisory Services, LLC and Franklin Templeton Advisors, Inc. have sole voting power for 18,270,832 and 920,539 shares, respectively, and sole dispositive power for 18,457,432 and 920,539 shares, respectively; JP Morgan Chase & Co. reports that it has sole and shared voting power for 16,290,855 and 1,657,173 shares, respectively, and sole and shared dispositive power for 17,313,433 and 1,661,448 shares, respectively; FMR LLC reports its subsidiary, Strategic Advisors, Inc., has sole voting and dispositive power for 919,300 shares and its subsidiary, Fidelity Management & Research Company, has sole dispositive power for 16,384,158 shares; Black Rock, Inc. reports that it has sole voting and dispositive power for all share reported; Franklin Mutual Advisors, LLC reports it has sole voting and dispositive power for all shares reported. | |
(2) | Reflects the number of shares held as of February 1, 2010. Under the terms of the Old Republic International Corporation Employees Savings and Stock Ownership Plan (“ESSOP”), a participant is entitled to vote Old Republic stock held by the ESSOP, the shares of which have been allocated to the participant’s account. The Executive Committee of Old Republic, pursuant to the ESSOP, is authorized to vote Old Republic stock held by the ESSOP until such time as the shares of such stock has been allocated to a participant’s account or where a participant fails to exercise his or her voting rights. Additionally, the Executive Committee may be deemed to have sole investment power with respect to unallocated stock and shared power for allocated stock held by the ESSOP. The Executive Committee is composed of Messrs. Bischof, Dixon, Steiner and Zucaro. The Trustees for the Trust established by the ESSOP are Messrs. LeRoy, Mueller, Rager and Zucaro. In addition to the ESSOP, the Old Republic International Employees Retirement Plan and two other retirement plans of subsidiaries hold an aggregate of 2,280,000 shares of Old Republic’s stock, not included in this table, for |
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which the voting of these shares are controlled, directly or indirectly in a fiduciary capacity, by the Executive Committee. Also, American Business & Personal Insurance Mutual, Inc. (ABPIM) and its subsidiary Inter Capital Group, Inc. own 2,132,873 shares of Old Republic’s stock, not included in this table. ABPIM’s directors and senior officers are also executive officers of Old Republic. | ||
(3) | Includes only the shares that have been allocated to the employer matching and employee savings accounts of the director or executive officer as a participant in the ESSOP or other Profit Sharing Plans sponsored by subsidiaries. Excludes those shares for which the director or executive officer may be deemed to have investment and voting power as a result of being a member of the Executive Committee. Includes shares of Old Republic’s stock held by the RMIC Profit Sharing Plan for Mr. Dew and shares of Old Republic’s stock held by the Great West Casualty Corporation Profit Sharing Plan for Mr. Rager. | |
(4) | Includes the number of shares of Common Stock that the following listed persons would receive upon converting their holdings of Old Republic’s 8% Senior Notes. Mr. Bischof — 13,021; Mr. Dew — 17,361; Mr. Dixon — 2,170; Mr. Kellogg — 8,681; Mr. Knight — 8,681; Mr. Mueller — 2,064; Mr. Nard — 2,170; Mr. Rager — 2,170; Mr. Simpson — 26,042; Ms. Taubitz — 8,681; Mr. Titterton — 1,910; Mr. Walker — 4,340; Mr. Zucaro — 13,021. | |
(5) | Includes 8,437 shares held in trust for Mr. Bischof’s benefit. | |
(6) | Includes 209,471 shares owned by Mr. Dew’s wife. | |
(7) | Includes 134,648 shares owned by Mr. Simpson’s wife and 41,010 held in an IRA trust for Mr. Simpson’s benefit. | |
(8) | Includes 270,237 shares owned by Mr. Steiner directly, 465,000 shares held in trust for Mr. Steiner’s children, for which he is a co-trustee, and 91,201 shares held by the Steiner Foundation for which Mr. Steiner disclaims beneficial ownership. | |
(9) | Includes 5,239 shares held in IRA and SEP-IRA trusts for Mr. Titterton’s benefit. | |
(10) | Includes 1,250 shares owned by Mr. Van Mieghem’s wife and 6,125 shares held in an IRA trust for Mr. Van Mieghem’s benefit. | |
(11) | Includes 17,925 shares held in IRA and SEP-IRA trusts for Mr. Walker’s benefit and 9,000 shares held by his wife. |
(12) | Based on the conversion of 1,891,984 shares of PMA class A common stock owned by Black Rock, Inc. as reflected in a Schedule 13G on January 29, 2010 (over which Black Rock, Inc. reported that it had sole voting and dispositive power) into 1,040,591 shares of Old republic common stock in the Merger assuming an exchange ratio of 0.55. |
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• | Following certain corporate transactions that occur prior to the maturity date, Old Republic will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate transaction in certain circumstances. |
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• | Old Republic may not redeem the notes prior to the maturity date of the notes. | |
• | If Old Republic undergoes a fundamental change, holders may require Old Republic to purchase the notes in whole or in part for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to, but excluding, the fundamental change purchase date. |
• | senior in right of payment to Old Republic’s existing and future indebtedness that is expressly subordinated in right of payment to the notes; | |
• | equal in right of payment to Old Republic’s existing and future unsecured indebtedness that is not so subordinated; | |
• | junior in right of payment to any of Old Republic’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and | |
• | structurally junior to all existing and future indebtedness and liabilities incurred by Old Republic’s subsidiaries. |
Class A Common Stock | ||||||||
Name of Beneficial Owner | Beneficially Owned | Percent of Class(1) | ||||||
Peter S. Burgess | 34,009 | * | ||||||
Patricia A. Drago | 21,533 | * | ||||||
J. Gregory Driscoll | 24,972 | * | ||||||
Charles T. Freeman | 32,244 | * | ||||||
James C. Hellauer | 29,010 | (2) | * | |||||
Richard Lutenski | 34,009 | * | ||||||
John D. Rollins | 24,705 | * | ||||||
Neal C. Schneider | 112,756 | (3) | * | |||||
Vincent T. Donnelly | 719,128 | (4) | 2.2 | % | ||||
John Santulli, III | 38,148 | (5) | * | |||||
Anthony J. Ciofani | 30,297 | (6) | * | |||||
Stephen L. Kibblehouse | 4,236 | * | ||||||
John M. Cochrane | 18,849 | (7) | * | |||||
All executive officers and directors as a group (13 persons) | 1,123,896 | (8) | 3.5 | % |
* | Less than 1% | |
(1) | Based on 32,280,474 shares of PMA class A common stock outstanding as of July 30, 2010. |
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(2) | Includes 2,000 shares of PMA class A common stock held to an irrevocable trust for which Mr. Hellauer’s wife serves as trustee. | |
(3) | Includes options to purchase 12,987 shares of PMA class A common stock that are exercisable or will become exercisable within 60 days of July 30, 2010 under PMA’s equity incentive plans. | |
(4) | Includes options to purchase 583,259 shares of PMA class A common stock that are exercisable or will become exercisable within 60 days of July 30, 2010 under PMA’s equity incentive plans and 2,740 shares held in the Retirement Savings Plan as of July 30, 2010. | |
(5) | Includes options to purchase 20,511 shares of PMA class A common stock that are exercisable or will become exercisable within 60 days of July 30, 2010 under PMA’s equity incentive plans. | |
(6) | Includes options to purchase 18,023 shares of PMA class A common stock that are exercisable or will become exercisable within 60 days of July 30, 2010 under PMA’s equity incentive plans and 3,140 shares held in the Retirement Savings Plan as of July 30, 2010. | |
(7) | Includes options to purchase 7,013 shares of PMA class A common stock that are exercisable or will become exercisable within 60 days of July 30, 2010 under PMA’s equity incentive plans. | |
(8) | Includes options to purchase 641,793 shares of PMA class A common stock that are exercisable or will become exercisable within 60 days of July 30, 2010 under PMA’s equity incentive plans and 5,880 shares of PMA class A common stock held in the Retirement Savings Plan as of July 30, 2010. |
Class A Common Stock | ||||||||
Name and Address of Beneficial Owner | Beneficiary Owned | Percent of Class(1) | ||||||
Donald Smith & Co., Inc. | 3,215,327 | (2) | 9.96 | % | ||||
152 West 57th Street | ||||||||
New York, New York 10019 | ||||||||
Dimensional Fund Advisors LP | 2,729,280 | (3) | 8.45 | % | ||||
Palisades West, Building One | ||||||||
6300 Bee Cave Road | ||||||||
Austin, Texas 78746 | ||||||||
NWQ Investment Management Company, LLC | 2,413,442 | (4) | 7.48 | % | ||||
2049 Century Park East, 16th Floor | ||||||||
Los Angeles, California 90067 | ||||||||
BlackRock, Inc. | 1,891,984 | (5) | 5.86 | % | ||||
40 East 52nd Street | ||||||||
New York, New York 10022 | ||||||||
MMCAP International, Inc. SPC | 1,616,129 | (6) | 5.01 | % | ||||
P. O. Box 32021 SMB, Admiral Financial Centre | ||||||||
90 Fort Street | ||||||||
Grand Cayman, Cayman Islands, KY1-1208 |
(1) | Based on 32,280,474 shares of PMA class A common stock outstanding as of July 30, 2010. | |
(2) | Based solely on a Schedule 13G, filed on February 11, 2010. Donald Smith & Co., Inc. (“DS&C”) reported that it has sole voting power over 2,847,313 shares of PMA class A common stock and sole dispositive power over 3,215,327 shares of PMA class A common stock. Due to the dispositive power over the shares of PMA class A common stock, DS&C may be deemed to beneficially own such shares, which DS&C reported are owned by clients of DS&C. | |
(3) | Based solely on a Schedule 13G, filed on February 8, 2010. Dimensional Fund Advisors LP (“DFA”) reported that it has sole voting power over 2,718,930 shares of PMA class A common stock and sole dispositive power over 2,729,280 shares of PMA class A common stock. Due to the dispositive power over the shares of PMA class A common stock, DFA may be deemed to beneficiary own such shares, which DFA reported are owned by certain investment companies and certain commingled group trusts and separate accounts for which DFA serves an investment advisor or investment manager. DFA disclaims beneficial ownership of such shares. |
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(4) | Based solely on a Schedule 13G, filed on February 12, 2010. NWQ Investment Management Company, LLC (“NWQ”) reported that it has sole voting power over 2,046,907 share of PMA class A common stock and sole dispositive power of 2,413,442 shares of PMA class A common stock. Due to the dispositive power over the shares of PMA class A common stock, NWQ may be deemed to beneficiary own such shares, which NWQ reported are owned by clients of NWQ. | |
(5) | Based solely on a Schedule 13G, filed on January 29, 2010. BlackRock, Inc. reported that it has sole voting and dispositive power over 1,891,984 shares of PMA class A common stock. | |
(6) | Based solely on a Schedule 13G, filed on July 21, 2010. MMCAP International, Inc. SPC (“MMCAP”) reported that it has shared voting and dispositive power over 1,616,129 shares of PMA class A common stock. MMCAP shares voting and dispositive power over these shares with MM Asset Management Inc. whose address is 120 Adelaide Street West, Suite 2601, Toronto, Ontario, Canada M5H1T1. |
PMA Capital Corporation | Old Republic International Corporation | |
Authorized and Outstanding Capital Stock | ||
The total authorized number of shares of all classes of capital stock of PMA is 62,000,000 shares. Of this, 60,000,000 shares are par value $5.00 class A common stock and 2,000,000 shares are par value $0.01 preferred stock, of which 60,000 shares are designated as series A junior participating preferred stock. | The total authorized number of shares of all classes of capital stock of Old Republic is 675,000,000 shares. Of this, 500,000,000 shares are par value $1.00 common stock, 100,000,000 shares are par value $1.00 class B common stock and 75,000,000 shares are par value $0.01 preferred stock, of which 10,000,000 shares are designated as series A junior participating preferred stock and 1,500,000 shares are designated as series G-3 convertible preferred stock. | |
At July 30, 2010, 32,280,474 shares of class A common stock and no shares of series A junior participating preferred stock were issued and outstanding. | At July 29, 2010, 241,061,082 shares of common stock and no shares of class B common stock, series A junior participating preferred stock or series G-3 convertible preferred stock were issued and outstanding. | |
In addition, Old Republic has $316.25 million of 8.00% convertible senior notes due 2012 outstanding. |
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PMA Capital Corporation | Old Republic International Corporation | |
Voting Rights of PMA Class A Common Stock | ||
General. Each holder of PMA class A common stock is entitled to one vote for each share of such stock held of record and may not cumulate votes for the election of directors. | General. Following the merger, former holders of PMA class A common stock that receive Old Republic common stock will be entitled to one vote per share of Old Republic common stock. | |
Merger or Consolidation. Under the PBCL, the consummation of a merger requires the approval of a majority of the board of directors of a corporation and, except where the approval of shareholders is unnecessary, the approval of a majority of the votes cast by all shareholders entitled to vote thereon. Under the PBCL, a sale of all or substantially all of PMA’s assets would require the approval of the board of directors and the affirmative vote of a majority of all of the votes cast by shareholders entitled to vote thereon. | Merger or Consolidation. Old Republic’s certificate of incorporation requires a greater vote of shareholders for authorization of a merger or consolidation than that generally required by the DGCL. Under Old Republic’s certificate of incorporation, the affirmative vote of holders of 80% of the outstanding shares of all classes of stock entitled to vote in elections of directors taken together is required to approve a merger or consolidation, the sale of all, substantially all or any substantial part of Old Republic’s assets or the issuance or transfer of any substantial amount of Old Republic securities to 10% holders of Old Republic securities. | |
Business Combinations. Generally under the PBCL there is a five year moratorium on business combinations between a corporation and any interested shareholder (a shareholder holding at least 20% of PMA’s voting stock), subject to certain exceptions involving board and/or shareholder approval. PMA’s articles of incorporation specifically excludes portions of the PBCL pertaining to control transactions, business combinations, control share acquisitions and disgorgement of profits in certain corporate takeover scenarios. | Business Combinations. Old Republic’s certificate of incorporation also imposes additional restrictions upon “business combinations” with “interested shareholders” on top of those imposed by Section 203 of the DGCL, which generally prohibits a Delaware corporation from engaging in a business combination with an interested shareholder within three years after the shareholder becomes an interested shareholder by acquiring 15% of Old Republic’s voting stock. Under Old Republic’s certificate of incorporation, if within ten years of becoming 10% holder, such holder seeks to complete a business combination with Old Republic, the affirmative vote of holders of 662/3% of the outstanding shares of all classes of stock entitled to vote in elections of directors taken together is required to approve such business combination, subject to certain conditions and exceptions. | |
Directors | ||
General. PMA’s bylaws provide that the total number of PMA directors will be not less than nine nor more than fifteen, divided into three classes as nearly equal as possible and serving three-year terms. Currently, PMA has nine directors. | General. Old Republic’s by-laws provide that the total number of Old Republic directors will be not less than nine nor more than fifteen, divided into three classes as nearly equal as possible and serving three-year terms. Currently, Old Republic has eleven directors. | |
Election and Vacancies. Each holder of PMA class A common stock is entitled to one vote for each share of such stock held of record and may not cumulate votes for the election of directors. Directors are elected by a plurality of the votes of the shares present in person or represented by proxy at a shareholder meeting and entitled to vote. PMA’s bylaws provide that any vacancies in the board of directors will be filled by a majority vote of those directors remaining. | Election and Vacancies. Following the merger, former holders of PMA class A common stock that receive Old Republic common stock will be entitled to one vote per share of Old Republic common stock. As provided by the DGCL, holders of Old Republic common stock may not cumulate votes for the election of directors. Directors are elected by a plurality of the votes of the shares present in person or represented by proxy at a shareholder meeting and entitled to vote. Old Republic’s by-laws provide that any vacancies in the board of directors will be filled by a majority vote of those directors remaining. |
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PMA Capital Corporation | Old Republic International Corporation | |
Removal. PMA’s shareholders may remove directors only for cause, except that shareholders entitled to vote on the removal of directors without cause may do so by unanimous vote. | Removal. As provided by the DGCL, Old Republic’s directors may be removed only for cause. | |
Amendments to Organizational Documents | ||
Articles of Incorporation. Pursuant to the PBCL, following a resolution by PMA’s board of directors to amend the articles of incorporation or a petition by at least 10% of those shareholders entitled to vote on an amendment, PMA’s articles of incorporation may be amended by the affirmative vote of a majority of shareholders entitled to vote thereon. | Certificate of Incorporation. Under the DGCL, Old Republic’s certificate of incorporation may be amended by a majority vote of shareholders entitled to vote thereon following adoption of a resolution by the board of directors declaring the advisability of such amendment. In certain circumstances, greater than a simple majority vote is required to amend Old Republic’s certificate of incorporation. See above under the subheading “Voting Rights of PMA Class A Common Stock.” | |
Bylaws. Subject to certain limitations with regard to limitation of director liability and indemnification, PMA’s bylaws provide that they may be amended by either the affirmative vote of a majority of the outstanding voting power of PMA’s stock or by a majority vote of PMA’s board, subject to a shareholder right to change such board action by the affirmative vote of the holders of a majority of the outstanding voting power of PMA’s stock. | By-laws. Old Republic’s by-laws may be amended by the board of directors or by the affirmative vote of 662/3% of the outstanding shares of all classes of stock entitled to vote thereon. | |
Shareholder Action by Written Consent | ||
PMA’s bylaws provide that no shareholder action may be taken by unanimous or partial consent in lieu of a meeting. | Consistent with the DGCL, Old Republic’s by-laws provide that any meeting and vote of shareholders may be dispensed with upon the written consent of shareholders who would have been entitled to cast the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, subject to the provision of notice of such corporate action to those shareholders who did not consent if the consent was less than unanimous. | |
Special Meetings of Shareholders | ||
PMA’s bylaws provide that special meetings of shareholders may be called at any time only by PMA’s chairman, president or board of directors by providing notice to shareholders at least ten days prior to the day named for a meeting. | Old Republic’s by-laws provide that special meetings of shareholders may be called by the president and must be called by the president or secretary upon written request by a majority of the board of directors or shareholders owning a majority in amount of Old Republic’s stock issued, outstanding and entitled to vote. Notice of such meeting must be given not less than ten nor more than sixty days before the meeting. |
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PMA Capital Corporation | Old Republic International Corporation | |
Notice of Shareholder Meetings and Actions | ||
The PBCL provides that written notice of the time, place and date of a meeting of shareholders must be given or sent to each shareholder of record entitled to vote at the meeting at least ten days prior to the day named for a meeting that will consider a “fundamental change” or five days prior to the day named for the meeting in any other case. The PMA bylaws require that notice of a meeting of shareholders be sent to each shareholder entitled to vote at the meeting at least ten days before the meeting. A notice of a special meeting must state the purpose or purposes of the meeting. The PMA bylaws require a shareholder who intends to nominate a person to the board of directors or bring any matter before an annual meeting to provide advance notice of such intended action not less than ninety days prior to the date of the corporation’s proxy statement in connection with the previous year’s annual meeting. | The DGCL and Old Republic’s by-laws provide that written notice of the time, place and purpose or purposes of any annual or special meeting of shareholders must be given not less than 10 days and not more than 60 days before the date of the meeting to each shareholder entitled to vote at the meeting. | |
Indemnification and Limitation of Liability of Directors and Officers | ||
Indemnification of PMA’s directors and officers is required by PMA’s bylaws. The bylaws also provide that PMA may indemnify any other employee or agent. Indemnification extends to those liabilities and expenses actually and reasonably incurred by such individuals in connection with an action or proceeding by reason of the fact that such individual served PMA in a specified capacity, provided such individuals act or failure to act is not determined to be willful misconduct or reckless. PMA may also advance expenses to such individuals for purposes of defending such a suit. The bylaws further provide that a director shall not be personally liable for any action taken or any failure to take any action, unless such act or failure to act was a breach of the director’s fiduciary duties and the breach constitutes self-dealing, willful misconduct or recklessness. | Old Republic’s certificate of incorporation provides that Old Republic shall provide indemnification to any person who was or is a party to any action, civil or criminal, by reason of the fact that the individual was a director, officer, employee or agent of Old Republic provided that the individual acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of Old Republic, and, with respect to criminal actions, if the individual had no reasonable cause to believe the conduct was unlawful. Old Republic may also advance expenses to an indemnitee. The certificate of incorporation further provides that no director shall be personally liable for any breach of fiduciary duty, except with regard to breaches of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, violation of the DGCL with regard to payment of dividends or the repurchase or redemption of the corporation’s stock or any transaction from which a director derived an improper personal benefit. | |
Dividends | ||
PMA’s bylaws permit the payment of dividends to shareholders, provided that the PBCL restricts a corporation from paying dividends if, after payment,(a) the corporation would be unable to pay its debts as they become due in the usual course of its business, or(b) the total assets of the corporation would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. | Old Republic’s certificate of incorporation provides for the payment of dividends to shareholders to the extent permitted by law and subject to the preferential rights of any preferred shareholders. Under the DGCL, dividends may be declared by the board of directors and paid out of surplus, and, if no surplus is available, out of any net profits for the then current fiscal year, or both, provided that such payment would not reduce the corporation’s capital below the amount of capital represented by all classes of outstanding stock having a preference as to the distribution of assets upon liquidation of a corporation. |
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PMA Capital Corporation | Old Republic International Corporation | |
Other Corporate Constituencies | ||
Under the PBCL, PMA’s board of directors may, in discharging its duties, consider to the extent deemed appropriate the effects of any action upon any or all groups affected by such action, including shareholders, employees, suppliers, customers and creditors of the corporation, and upon communities in which officers or other establishments of the corporation are located. | The DGCL does not have an “other constituency” statute similar to that contained in the PBCL. | |
Appraisal Rights and Dissenters’ Rights | ||
Under the PBCL, unless the articles of incorporation or bylaws provide otherwise, shareholders of a Pennsylvania corporation generally are not entitled to dissenters’ rights if the shares that would otherwise give rise to such rights are listed on a national securities exchange, or held beneficially or of record by more than 2,000 persons, on the record date fixed to determine the shareholders entitled to notice of and vote at the meeting at which a merger or consolidation will be voted upon. Neither the PMA articles of incorporation nor the PMA bylaws contain provisions with respect to dissenters’ rights. | Under the DGCL, shareholders have the right to dissent from any plan of merger or consolidation to which the corporation is a party, and to demand payment for the fair value of their shares pursuant to, and in compliance with procedures set forth in, the “appraisal rights” provisions of the DGCL. However, unless the certificate of incorporation otherwise provides, Delaware law states that shareholders do not have such appraisal rights in connection with a merger or consolidation with respect to shares: | |
• listed on a national securities exchange or held of record by more than 2,000 holders; and | ||
• for which, pursuant to the plan of merger or consolidation, shareholders will receive only (i) shares or depository receipts of another corporation which at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders, (ii) shares of stock or depositary receipts of the surviving corporation in the merger or consolidation, (iii) cash in lieu of fractional shares or (iv) any combination of the foregoing. | ||
In addition, Delaware law provides that, unless the certificate of incorporation provides otherwise, shareholders of a surviving corporation do not have appraisal rights in connection with a plan of merger if the merger did not require for its approval the vote of the surviving corporation’s shareholders. The Old Republic certificate of incorporation does not contain any provisions with respect to appraisal rights. |
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PMA Capital Corporation | Old Republic International Corporation | |
Rights Plan | ||
In August 2009, PMA’s Board of Directors adopted a Section 382 shareholder rights plan designed to protect the company’s net operating loss carryforward from limitation as a result of an ownership change. The plan was approved by PMA’s shareholders at PMA’s 2010 annual meeting of shareholders. Under the PMA shareholder rights plan, each outstanding share of the company’s common stock has an associated preferred share purchase right. The rights are exercisable upon the earlier of (i) 10 days after the date of a public announcement that a person has acquired beneficial ownership of 5% or more of the outstanding shares of PMA class A common stock or (ii) 10 days after a person begins or publicly announces an intent to begin a tender or exchange offer that would result in that person acquiring beneficial ownership of 5% or more of the outstanding shares of PMA class A common stock. If the rights become exercisable, the rights would allow PMA shareholders (other than the acquiring person or group) to purchase one one-thousandth of a share of series A junior participating preferred stock, no par value per share, of PMA at a price of $35, subject to adjustment. Holders of shares of the series A junior participating preferred stock are entitled to a preferential quarterly dividend, voting rights and a stipulated return in the event of a merger or similar transaction — prior to exercise, the right does not give the holder any such dividend, voting or other rights. | Pursuant to the terms of Old Republic’s rights agreement, each preferred share purchase right entitles the holder to purchase from Old Republic one one-hundredth of a share of series A junior participating preferred stock at a price of $100 per share, subject to adjustment. The rights become exercisable upon the earlier to occur of (i) the public announcement that a person has acquired beneficial ownership of 20% or more of the outstanding shares of Old Republic common stock or (ii) 10 days following the commencement of a tender offer or exchange offer for 20% or more of Old Republic’s common stock. In such event, each holder of a right will have the right to receive, upon exercise and payment of the purchase price, that number of shares of Old Republic common stock or one-hundredths of a share of series A junior participating preferred stock (or, in certain circumstances, other securities of Old Republic) having a value equal to two times the exercise price of the right. In the event that Old Republic is a party to certain types of mergers or more than 50% of Old Republic’s assets or earning power is sold in certain circumstances, then each holder of a right shall have the right to receive, upon exercise, common shares of the acquiring company having a value equal to two times the exercise price of the right. The rights will expire on June 26, 2017. | |
In the event a person acquires the beneficial ownership of 5% or more of the outstanding shares of PMA class A common stock, all holders of rights except such acquiring person may purchase the number of shares of PMA class A common stock having a market value equal to $70. If, at any time after a person becomes the beneficial owner of 5% or more of the outstanding shares of PMA class A common stock, PMA is acquired in a merger or other business combination, or if 50% or more of PMA’s assets are sold, all holders of rights except such acquiring person may purchase that number of shares of the acquiring entity having a market value of $70. | Upon issuance, each share of series A junior participating preferred stock will be entitled to certain preferential dividend payments, liquidation payments and voting rights. In addition, in the event of any merger, consolidation or other transaction in which Old Republic common stock is exchanged, each share of series A junior participating preferred stock will be entitled to receive 100 times the amount received per share of Old Republic common stock. |
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• | Internet. Shareholders may submit a proxy over the Internet by going to the website listed on their proxy card. Once at the website, follow the instructions to submit a proxy. | |
• | Telephone. Shareholders may submit a proxy using the toll-free number listed on their proxy card.Easy-to-follow voice prompts will help them and confirm that their submission instructions have been followed. | |
• | Mail. Shareholders may submit a proxy by signing, dating and returning their proxy card in the preaddressed postage-paid envelope provided. |
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Old Republic | PMA | |
Old Republic International Corporation 307 North Michigan Avenue Chicago, Illinois 60601 Attention: Investor Relations Telephone:(312) 346-8100 | PMA Capital Corporation 380 Sentry Parkway Blue Bell, Pennsylvania 19422 Attention: Investor Relations Telephone: (610) 397-5298 |
PMA SEC Filings (File No. 001-31706) | Period or Date Filed | |
Annual Report onForm 10-K | Fiscal year ended December 31, 2009 | |
Quarterly Report onForm 10-Q | March 31, 2010 | |
Definitive Proxy Statement on Schedule 14A | Filed on March 29, 2010 | |
Current Reports onForm 8-K | Filed on April 27, 2010, May 6, 2010, June 10, 2010, June 10, 2010, July 15, 2010 and July 30, 2010 |
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OLD REPUBLIC INTERNATIONAL CORPORATION
Page No. | ||||
Financial Statements for the Year Ended December 31, 2009 | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-39 | ||||
F-40 | ||||
Financial Statements for the Period Ended March 31, 2010 | ||||
F-53 | ||||
F-54 | ||||
F-55 | ||||
F-56 | ||||
F-57 |
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December 31, | ||||||||
2009 | 2008 | |||||||
($ in millions, except share data) | ||||||||
ASSETS | ||||||||
Investments: | ||||||||
Available for sale: | ||||||||
Fixed maturity securities (at fair value) (amortized cost: $7,896.2 and $7,385.2) | $ | 8,326.8 | $ | 7,406.9 | ||||
Equity securities (at fair value) (adjusted cost: $357.5 and $373.3) | 502.9 | 350.3 | ||||||
Short-term investments (at fair value which approximates cost) | 826.7 | 888.0 | ||||||
Miscellaneous investments | 24.0 | 29.7 | ||||||
Total | 9,680.5 | 8,675.0 | ||||||
Other investments | 7.8 | 7.8 | ||||||
Total investments | 9,688.4 | 8,682.9 | ||||||
Other Assets: | ||||||||
Cash | 77.3 | 63.9 | ||||||
Securities and indebtedness of related parties | 17.1 | 17.4 | ||||||
Accrued investment income | 113.3 | 108.2 | ||||||
Accounts and notes receivable | 788.6 | 806.7 | ||||||
Federal income tax recoverable: | ||||||||
Current | 7.3 | 41.0 | ||||||
Prepaid federal income taxes | 221.4 | 463.4 | ||||||
Reinsurance balances and funds held | 141.9 | 67.6 | ||||||
Reinsurance recoverable: | ||||||||
Paid losses | 66.7 | 52.2 | ||||||
Policy and claim reserves | 2,491.2 | 2,395.7 | ||||||
Deferred policy acquisition costs | 206.9 | 222.8 | ||||||
Sundry assets | 369.3 | 343.8 | ||||||
4,501.6 | 4,583.1 | |||||||
Total Assets | $ | 14,190.0 | $ | 13,266.0 | ||||
LIABILITIES, PREFERRED STOCK, AND COMMON SHAREHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Losses, claims, and settlement expenses | $ | 7,915.0 | $ | 7,241.3 | ||||
Unearned premiums | 1,038.1 | 1,112.3 | ||||||
Other policyholders’ benefits and funds | 185.2 | 180.7 | ||||||
Total policy liabilities and accruals | 9,138.4 | 8,534.3 | ||||||
Commissions, expenses, fees, and taxes | 266.3 | 264.5 | ||||||
Reinsurance balances and funds | 321.3 | 264.8 | ||||||
Federal income tax payable: | ||||||||
Deferred | 47.5 | 77.3 | ||||||
Debt | 346.7 | 233.0 | ||||||
Sundry liabilities | 178.0 | 151.5 | ||||||
Commitments and contingent liabilities | ||||||||
Total Liabilities | 10,298.6 | 9,525.7 | ||||||
Preferred Stock(1) | — | — | ||||||
Common Shareholders’ Equity: | ||||||||
Common stock(1) | 240.6 | 240.5 | ||||||
Additional paid-in capital | 412.4 | 405.0 | ||||||
Retained earnings | 2,927.3 | 3,186.5 | ||||||
Accumulated other comprehensive income (loss) | 353.7 | (41.7 | ) | |||||
Unallocated ESSOP shares (at cost) | (42.7 | ) | (50.0 | ) | ||||
Treasury stock (at cost)(1) | — | — | ||||||
Total Common Shareholders’ Equity | 3,891.4 | 3,740.3 | ||||||
Total Liabilities, Preferred Stock and Common Shareholders’ Equity | $ | 14,190.0 | $ | 13,266.0 | ||||
(1) | At December 31, 2009 and 2008, there were 75,000,000 shares of $0.01 par value preferred stock authorized, of which no shares were outstanding. As of the same dates, there were 500,000,000 shares of common stock, $1.00 par value, authorized, of which 240,685,448 and 240,520,251 were issued as of December 31, 2009 and 2008, respectively. At December 31, 2009 and 2008, there were 100,000,000 shares of Class B Common Stock, $1.00 par value, authorized, of which no shares were issued. There were no common shares classified as treasury stock as of December 31, 2009 and 2008. |
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Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in millions, except share data) | ||||||||||||
Revenues: | ||||||||||||
Net premiums earned | $ | 3,111.5 | $ | 3,125.1 | $ | 3,389.0 | ||||||
Title, escrow, and other fees | 277.4 | 192.9 | 212.1 | |||||||||
Total premiums and fees | 3,388.9 | 3,318.1 | 3,601.2 | |||||||||
Net investment income | 383.5 | 377.3 | 379.9 | |||||||||
Other income | 24.8 | 28.7 | 39.4 | |||||||||
Total operating revenues | 3,797.2 | 3,724.2 | 4,020.6 | |||||||||
Realized investment gains (losses): | ||||||||||||
From sales | 15.9 | (4.1 | ) | 70.3 | ||||||||
From impairments | (9.5 | ) | (482.3 | ) | — | |||||||
Total realized investment gains (losses) | 6.3 | (486.4 | ) | 70.3 | ||||||||
Total revenues | 3,803.6 | 3,237.7 | 4,091.0 | |||||||||
Benefits, Claims and Expenses: | ||||||||||||
Benefits, claims and settlement expenses | 2,591.0 | 2,700.4 | 2,156.9 | |||||||||
Dividends to policyholders | 7.8 | 15.2 | 9.3 | |||||||||
Underwriting, acquisition, and other expenses | 1,454.0 | 1,338.5 | 1,538.9 | |||||||||
Interest and other charges | 24.2 | 2.7 | 7.3 | |||||||||
Total expenses | 4,077.2 | 4,056.9 | 3,712.6 | |||||||||
Income (loss) before income taxes (credits) | (273.6 | ) | (819.2 | ) | 378.4 | |||||||
Income Taxes (Credits): | ||||||||||||
Current | 56.5 | 19.4 | 172.5 | |||||||||
Deferred | (230.9 | ) | (280.3 | ) | (66.5 | ) | ||||||
Total | (174.4 | ) | (260.8 | ) | 105.9 | |||||||
Net Income (Loss) | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | ||||
Net Income (Loss) Per Share: | ||||||||||||
Basic: | $ | (.42 | ) | $ | (2.41 | ) | $ | 1.18 | ||||
Diluted: | $ | (.42 | ) | $ | (2.41 | ) | $ | 1.17 | ||||
Average shares outstanding: | ||||||||||||
Basic | 235,657,425 | 231,484,083 | 231,370,242 | |||||||||
Diluted | 235,657,425 | 231,484,083 | 232,912,728 | |||||||||
Dividends Per Common Share: | ||||||||||||
Cash: | $ | .68 | $ | .67 | $ | .63 | ||||||
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Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in millions) | ||||||||||||
Net income (loss) as reported | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | ||||
Other comprehensive income (loss): | ||||||||||||
Post-tax net unrealized gains (losses) on securities | 376.1 | (78.1 | ) | 12.4 | ||||||||
Other adjustments | 19.3 | (56.9 | ) | 35.8 | ||||||||
Net adjustments | 395.4 | (135.1 | ) | 48.3 | ||||||||
Comprehensive income (loss) | $ | 296.3 | $ | (693.4 | ) | $ | 320.8 | |||||
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Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in millions) | ||||||||||||
Convertible Preferred Stock: | ||||||||||||
Balance, end of year | $ | — | $ | — | $ | — | ||||||
Common Stock: | ||||||||||||
Balance, beginning of year | $ | 240.5 | $ | 232.0 | $ | 231.0 | ||||||
Dividend reinvestment plan | — | — | — | |||||||||
Exercise of stock options | — | .2 | .9 | |||||||||
Issuance of shares | — | 9.7 | — | |||||||||
Treasury stock restored to unissued status | — | (1.5 | ) | — | ||||||||
Balance, end of year | $ | 240.6 | $ | 240.5 | $ | 232.0 | ||||||
Additional Paid-in Capital: | ||||||||||||
Balance, beginning of year | $ | 405.0 | $ | 344.4 | $ | 319.5 | ||||||
Dividend reinvestment plan | .8 | .9 | 1.0 | |||||||||
Exercise of stock options | .4 | 2.0 | 13.0 | |||||||||
Issuance of shares | — | 73.1 | — | |||||||||
Stock option compensation | 4.9 | 11.2 | 10.8 | |||||||||
ESSOP shares released | 1.1 | — | — | |||||||||
Treasury stock restored to unissued status | — | (26.8 | ) | — | ||||||||
Balance, end of year | $ | 412.4 | $ | 405.0 | $ | 344.4 | ||||||
Retained Earnings: | ||||||||||||
Balance, beginning of year | $ | 3,186.5 | $ | 3,900.1 | $ | 3,773.9 | ||||||
Net income (loss) | (99.1 | ) | (558.3 | ) | 272.4 | |||||||
Dividends on common stock: cash | (160.0 | ) | (155.2 | ) | (145.4 | ) | ||||||
Effects of changing pension plan measurement date, net of tax | — | — | (.8 | ) | ||||||||
Balance, end of year | $ | 2,927.3 | $ | 3,186.5 | $ | 3,900.1 | ||||||
Accumulated Other Comprehensive Income (Loss): | ||||||||||||
Balance, beginning of year | $ | (41.7 | ) | $ | 93.3 | $ | 44.6 | |||||
Foreign currency translation adjustments | 18.9 | (27.1 | ) | 20.7 | ||||||||
Net unrealized gains (losses) on securities, net of tax | 376.1 | (78.1 | ) | 12.4 | ||||||||
Net adjustment related to defined benefit pension plans, net of tax | .3 | (29.8 | ) | 15.3 | ||||||||
Balance, end of year | $ | 353.7 | $ | (41.7 | ) | $ | 93.3 | |||||
Unallocated ESSOP Shares: | ||||||||||||
Balance, beginning of year | $ | (50.0 | ) | $ | — | $ | — | |||||
Unallocated ESSOP shares issued | — | (50.0 | ) | — | ||||||||
ESSOP shares released | 7.2 | — | — | |||||||||
Balance, end of year | $ | (42.7 | ) | $ | (50.0 | ) | $ | — | ||||
Treasury Stock: | ||||||||||||
Balance, beginning of year | $ | — | $ | (28.3 | ) | $ | — | |||||
Acquired during the year | — | — | (28.3 | ) | ||||||||
Restored to unissued status | — | 28.3 | — | |||||||||
Balance, end of year | $ | — | $ | — | $ | (28.3 | ) | |||||
F-5
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in millions) | ||||||||||||
Cash flows from operating activities: | �� | |||||||||||
Net income (loss) | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Deferred policy acquisition costs | 18.0 | 20.3 | 21.2 | |||||||||
Premiums and other receivables | 18.5 | 73.5 | 82.2 | |||||||||
Unpaid claims and related items | 583.0 | 769.5 | 646.4 | |||||||||
Other policyholders’ benefits and funds | (77.0 | ) | (36.5 | ) | (1.3 | ) | ||||||
Income taxes | (199.9 | ) | (315.1 | ) | (57.1 | ) | ||||||
Prepaid federal income taxes | 241.9 | 73.1 | (68.1 | ) | ||||||||
Reinsurance balances and funds | (32.9 | ) | (7.0 | ) | (29.3 | ) | ||||||
Realized investment (gains) losses | (6.3 | ) | 486.4 | (70.3 | ) | |||||||
Accounts payable, accrued expenses and other | 87.0 | 59.6 | 66.5 | |||||||||
Total | 532.9 | 565.6 | 862.5 | |||||||||
Cash flows from investing activities: | ||||||||||||
Fixed maturity securities: | ||||||||||||
Maturities and early calls | 1,047.6 | 853.3 | 692.0 | |||||||||
Sales | 153.9 | 94.2 | 120.9 | |||||||||
Sales of: | ||||||||||||
Equity securities | 24.9 | 90.0 | 393.3 | |||||||||
Other — net | 5.6 | 44.2 | 15.5 | |||||||||
Purchases of: | ||||||||||||
Fixed maturity securities | (1,727.4 | ) | (1,124.6 | ) | (1,257.8 | ) | ||||||
Equity securities | — | (111.2 | ) | (604.6 | ) | |||||||
Other — net | (19.6 | ) | (30.9 | ) | (30.4 | ) | ||||||
Purchase of a business | (3.5 | ) | (4.3 | ) | (4.4 | ) | ||||||
Net decrease (increase) in short-term investments | 62.3 | (427.2 | ) | 32.4 | ||||||||
Other-net | (8.4 | ) | 9.1 | — | ||||||||
Total | (464.5 | ) | (607.3 | ) | (643.0 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Issuance of debentures and notes | 576.2 | 280.0 | 121.3 | |||||||||
Issuance of common shares | 1.4 | 86.1 | 15.0 | |||||||||
Redemption of debentures and notes | (472.8 | ) | (110.9 | ) | (201.6 | ) | ||||||
Issuance of unallocated ESSOP shares | — | (50.0 | ) | — | ||||||||
Dividends on common shares | (160.0 | ) | (155.2 | ) | (145.4 | ) | ||||||
Purchase of treasury shares | — | — | (28.3 | ) | ||||||||
Other-net | — | 1.6 | 1.8 | |||||||||
Total | (55.1 | ) | 51.5 | (237.1 | ) | |||||||
Increase (decrease) in cash: | 13.3 | 9.9 | (17.6 | ) | ||||||||
Cash, beginning of year | 63.9 | 54.0 | 71.6 | |||||||||
Cash, end of year | $ | 77.3 | $ | 63.9 | $ | 54.0 | ||||||
Supplemental cash flow information: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 19.1 | $ | 3.8 | $ | 7.1 | ||||||
Income taxes | $ | 24.3 | $ | 53.8 | $ | 162.5 | ||||||
F-6
Table of Contents
F-7
Table of Contents
Shareholders’ Equity | Net Income (Loss) | |||||||||||||||||||
December 31, | Years Ended December 31, | |||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2007 | ||||||||||||||||
Statutory totals of insurance company subsidiaries: | ||||||||||||||||||||
General | $ | 2,383.2 | $ | 2,112.4 | $ | 203.9 | $ | (63.9 | ) | $ | 329.2 | |||||||||
Mortgage Guaranty | 332.0 | 194.3 | (474.8 | ) | (595.6 | ) | (99.6 | ) | ||||||||||||
Title | 183.7 | 156.4 | (9.7 | ) | (9.4 | ) | 21.5 | |||||||||||||
Life & Health | 68.8 | 58.3 | 5.9 | 3.0 | 7.2 | |||||||||||||||
Sub-total | 2,967.7 | 2,521.4 | (274.7 | ) | (665.9 | ) | 258.3 | |||||||||||||
GAAP totals of non-insurance company subsidiaries and consolidation adjustments | 269.8 | 215.0 | (24.6 | ) | (148.1 | ) | (32.3 | ) | ||||||||||||
Unadjusted totals | 3,237.7 | 2,736.4 | (299.2 | ) | (814.2 | ) | 226.1 | |||||||||||||
Adjustments to conform to GAAP statements: | ||||||||||||||||||||
Deferred policy acquisition costs | 200.9 | 218.5 | (19.5 | ) | (19.7 | ) | (21.4 | ) | ||||||||||||
Fair value of fixed maturity securities | 424.3 | 34.9 | — | — | — | |||||||||||||||
Non-admitted assets | 56.5 | 47.6 | — | — | — | |||||||||||||||
Deferred income taxes | (292.3 | ) | (273.9 | ) | 216.3 | 256.4 | 63.7 | |||||||||||||
Mortgage contingency reserves | 392.9 | 867.8 | — | — | — | |||||||||||||||
Title unearned premiums | 339.0 | 336.1 | 2.9 | (20.0 | ) | (6.8 | ) | |||||||||||||
Loss reserves | (242.6 | ) | (243.0 | ) | .5 | 11.1 | 10.6 | |||||||||||||
Surplus notes | (315.0 | ) | (55.0 | ) | — | — | — | |||||||||||||
Sundry adjustments | 89.5 | 70.9 | (.4 | ) | 28.1 | .2 | ||||||||||||||
Total adjustments | 653.6 | �� | 1,003.7 | 200.0 | 256.1 | 46.4 | ||||||||||||||
Consolidated GAAP totals | $ | 3,891.4 | $ | 3,740.3 | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | ||||||||
F-8
Table of Contents
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Fixed Maturity Securities: | ||||||||||||||||
December 31, 2009: | ||||||||||||||||
U.S. & Canadian Governments | $ | 937.4 | $ | 39.6 | $ | 3.0 | $ | 974.0 | ||||||||
Tax-exempt | 2,209.3 | 135.0 | .3 | 2,344.0 | ||||||||||||
Corporate | 4,749.4 | 273.2 | 14.0 | 5,008.7 | ||||||||||||
$ | 7,896.2 | $ | 448.0 | $ | 17.4 | $ | 8,326.8 | |||||||||
December 31, 2008: | ||||||||||||||||
U.S. & Canadian Governments | $ | 631.6 | $ | 62.8 | $ | — | $ | 694.4 | ||||||||
Tax-exempt | 2,290.0 | 77.2 | 1.5 | 2,365.7 | ||||||||||||
Corporate | 4,463.5 | 56.6 | 173.3 | 4,346.7 | ||||||||||||
$ | 7,385.2 | $ | 196.8 | $ | 175.0 | $ | 7,406.9 | |||||||||
F-9
Table of Contents
Estimated | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
Fixed Maturity Securities: | ||||||||
Due in one year or less | $ | 731.6 | $ | 745.0 | ||||
Due after one year through five years | 4,345.2 | 4,570.9 | ||||||
Due after five years through ten years | 2,758.6 | 2,951.1 | ||||||
Due after ten years | 60.7 | 59.7 | ||||||
$ | 7,896.2 | $ | 8,326.8 | |||||
Gross | Gross | Estimated | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
December 31, 2009 | $ | 357.5 | $ | 159.0 | $ | 13.7 | $ | 502.9 | ||||||||
December 31, 2008 | $ | 373.3 | $ | 49.6 | $ | 72.7 | $ | 350.3 | ||||||||
12 Months or Less | Greater Than 12 Months | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
December 31, 2009: | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
U.S. & Canadian Governments | $ | 307.1 | $ | 3.0 | $ | — | $ | — | $ | 307.1 | $ | 3.0 | ||||||||||||
Tax-exempt | 13.9 | .2 | 3.1 | — | 17.1 | .3 | ||||||||||||||||||
Corporates | 302.5 | 5.1 | 139.3 | 8.9 | 441.8 | 14.0 | ||||||||||||||||||
Subtotal | 623.6 | 8.4 | 142.5 | 8.9 | 766.1 | 17.4 | ||||||||||||||||||
Equity Securities | 1.2 | .2 | 99.5 | 13.4 | 100.8 | 13.7 | ||||||||||||||||||
Total | $ | 624.9 | $ | 8.6 | $ | 242.1 | $ | 22.4 | $ | 867.0 | $ | 31.1 | ||||||||||||
December 31, 2008: | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
U.S. & Canadian Governments | $ | 1.0 | $ | — | $ | — | $ | — | $ | 1.0 | $ | — | ||||||||||||
Tax-exempt | 60.8 | 1.4 | 7.7 | — | 68.5 | 1.5 | ||||||||||||||||||
Corporates | 1,981.4 | 112.4 | 504.3 | 61.0 | 2,485.8 | 173.4 | ||||||||||||||||||
Subtotal | 2,043.2 | 113.9 | 512.1 | 61.1 | 2,555.4 | 175.0 | ||||||||||||||||||
Equity Securities | 247.8 | 72.7 | — | — | 247.9 | 72.7 | ||||||||||||||||||
Total | $ | 2,291.1 | $ | 186.5 | $ | 512.1 | $ | 61.2 | $ | 2,803.3 | $ | 247.7 | ||||||||||||
F-10
Table of Contents
Fair Value Measurements as of December 31, 2009: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Available for sale: | ||||||||||||||||
Fixed maturity securities | $ | 341.4 | $ | 7,964.8 | $ | 20.5 | $ | 8,326.8 | ||||||||
Equity securities | 502.5 | .1 | .2 | 502.9 | ||||||||||||
Short-term investments | $ | 820.8 | $ | — | $ | 5.9 | $ | 826.7 |
F-11
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Investment income from: | ||||||||||||
Fixed maturity securities | $ | 368.6 | $ | 345.2 | $ | 332.9 | ||||||
Equity securities | 7.4 | 13.3 | 16.1 | |||||||||
Short-term investments | 5.4 | 16.5 | 28.2 | |||||||||
Other sources | 4.9 | 5.6 | 6.4 | |||||||||
Gross investment income | 386.5 | 380.8 | 383.8 | |||||||||
Investment expenses(a) | 3.0 | 3.4 | 3.8 | |||||||||
Net investment income | $ | 383.5 | $ | 377.3 | $ | 379.9 | ||||||
Realized gains (losses) on: | ||||||||||||
Fixed maturity securities: | ||||||||||||
Gains | $ | 4.4 | $ | 4.6 | $ | 2.4 | ||||||
Losses | (1.7 | ) | (41.2 | ) | (.2 | ) | ||||||
Net | 2.6 | (36.5 | ) | 2.2 | ||||||||
Equity securities & other long-term investments | 3.7 | (449.8 | ) | 68.1 | ||||||||
Total | 6.3 | (486.4 | ) | 70.3 | ||||||||
Income taxes (credits)(b) | (51.7 | ) | (116.1 | ) | 24.6 | |||||||
Net realized gains (losses) | $ | 58.1 | $ | (370.2 | ) | $ | 45.7 | |||||
Changes in unrealized investment gains (losses) on: | ||||||||||||
Fixed maturity securities | $ | 408.0 | $ | (49.7 | ) | $ | 112.1 | |||||
Less: Deferred income taxes (credits) | 142.7 | (17.5 | ) | 39.2 | ||||||||
Net changes in unrealized investment gains (losses) | $ | 265.2 | $ | (32.1 | ) | $ | 72.9 | |||||
Equity securities & other long-term investments | $ | 170.6 | $ | (70.6 | ) | $ | (93.0 | ) | ||||
Less: Deferred income taxes (credits) | 59.6 | (24.6 | ) | (32.5 | ) | |||||||
Net changes in unrealized investment gains (losses) | $ | 110.9 | $ | (45.9 | ) | $ | (60.5 | ) | ||||
(a) | Investment expenses consist of personnel costs and investment management and custody service fees, as well as interest incurred on funds held of $.1, $.6 and $1.1 for the years ended December 31, 2009, 2008 and 2007, respectively. |
F-12
Table of Contents
(b) | Reflects primarily the combination of fully taxable realized investment gains or losses and judgments about the recoverability of deferred tax assets. |
F-13
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Deferred, beginning of year | $ | 222.8 | $ | 246.5 | $ | 264.9 | ||||||
Acquisition costs deferred: | ||||||||||||
Commissions — net of reinsurance | 153.4 | 165.0 | 210.6 | |||||||||
Premium taxes | 74.5 | 80.8 | 78.5 | |||||||||
Salaries and other marketing expenses | 91.8 | 88.3 | 94.7 | |||||||||
Sub-total | 319.8 | 334.2 | 384.1 | |||||||||
Amortization charged to income | (335.7 | ) | (357.8 | ) | (402.5 | ) | ||||||
Change for the year | (15.9 | ) | (23.6 | ) | (18.4 | ) | ||||||
Deferred, end of year | $ | 206.9 | $ | 222.8 | $ | 246.5 | ||||||
December 31, | ||||||||
2009 | 2008 | |||||||
General Insurance Group | $ | 962.7 | $ | 1,022.0 | ||||
Mortgage Guaranty Group | 75.4 | 90.2 | ||||||
Total | $ | 1,038.1 | $ | 1,112.3 | ||||
F-14
Table of Contents
F-15
Table of Contents
F-16
Table of Contents
Years Ended December 31: | 2009 | 2008 | 2007 | |||||||||
Gross reserves at beginning of year | $ | 7,241.3 | $ | 6,231.1 | $ | 5,534.7 | ||||||
Less: reinsurance losses recoverable | 2,227.0 | 1,984.7 | 1,936.6 | |||||||||
Net reserves at beginning of year: | ||||||||||||
General Insurance | 3,326.9 | 3,279.7 | 3,022.8 | |||||||||
Mortgage Guaranty | 1,382.6 | 644.9 | 249.6 | |||||||||
Title Insurance | 282.4 | 296.9 | 304.1 | |||||||||
Other | 22.2 | 24.7 | 21.6 | |||||||||
Sub-total | 5,014.2 | 4,246.3 | 3,598.0 | |||||||||
Incurred claims and claim adjustment expenses: | ||||||||||||
Provisions for insured events of the current year: | ||||||||||||
General Insurance | 1,409.2 | 1,520.1 | 1,562.8 | |||||||||
Mortgage Guaranty | 1,284.0 | 1,199.5 | 551.3 | |||||||||
Title Insurance | 63.6 | 46.3 | 72.3 | |||||||||
Other | 36.4 | 41.9 | 37.8 | |||||||||
Sub-total | 2,793.3 | 2,807.8 | 2,224.2 | |||||||||
Change in provision for insured events of prior years: | ||||||||||||
General Insurance | (56.8 | ) | (83.0 | ) | (110.6 | ) | ||||||
Mortgage Guaranty(a) | (149.9 | ) | (18.7 | ) | 64.4 | |||||||
Title Insurance | 6.7 | (0.6 | ) | (16.3 | ) | |||||||
Other | (1.3 | ) | (3.8 | ) | (3.6 | ) | ||||||
Sub-total | (201.3 | ) | (106.1 | ) | (66.1 | ) | ||||||
Total incurred claims and claim adjustment expenses(a) | 2,592.0 | 2,701.6 | 2,158.1 | |||||||||
Payments: | ||||||||||||
Claims and claim adjustment expenses attributable to insured events of the current year: | ||||||||||||
General Insurance | 498.6 | 549.0 | 518.7 | |||||||||
Mortgage Guaranty(a) | 7.8 | 59.8 | 29.6 | |||||||||
Title Insurance | 7.1 | 5.4 | 7.5 | |||||||||
Other | 25.8 | 30.3 | 23.9 | |||||||||
Sub-total | 539.3 | 644.5 | 579.7 | |||||||||
Claims and claim adjustment expenses attributable to insured events of prior years: | ||||||||||||
General Insurance | 846.4 | 840.8 | 676.3 | |||||||||
Mortgage Guaranty(a) | 543.5 | 383.2 | 190.8 | |||||||||
Title Insurance | 68.5 | 54.8 | 55.8 | |||||||||
Other | 9.9 | 10.2 | 7.1 | |||||||||
Sub-total | 1,468.3 | 1,289.0 | 930.0 | |||||||||
Total payments | 2,007.7 | 1,933.5 | 1,509.8 | |||||||||
Amount of reserves for unpaid claims and claim adjustment expenses at the end of each year, net of reinsurance losses recoverable:(b) | ||||||||||||
General Insurance | 3,334.3 | 3,326.9 | 3,279.7 | |||||||||
Mortgage Guaranty | 1,965.4 | 1,382.6 | 644.9 | |||||||||
Title Insurance | 277.1 | 282.4 | 296.9 | |||||||||
Other | 21.5 | 22.2 | 24.7 | |||||||||
Sub-total | 5,598.5 | 5,014.2 | 4,246.3 | |||||||||
Reinsurance losses recoverable | 2,316.5 | 2,227.0 | 1,984.7 | |||||||||
Gross reserves at end of year | $ | 7,915.0 | $ | 7,241.3 | $ | 6,231.1 | ||||||
F-17
Table of Contents
(a) | In common with all other insurance lines, mortgage guaranty paid and incurred claim and claim adjustment expenses include only those costs actually or expected to be paid by the Company. Claims not paid by virtue of coverage rescissions and claims denials amounted to $719.5, $211.0, and $36.4 for 2009, 2008, and 2007, respectively. In a similar vein, changes in mortgage guaranty aggregate case, IBNR, and loss adjustment expense reserves shown in the following table and entering into the determination of incurred claim costs, take into account, among a large number of variables, claim cost reductions for anticipated coverage rescissions and claims denials of $881.9 in 2009, $830.5 in 2008, and none in 2007. The significant decline of $149.9 in 2009 for prior years’ mortgage guaranty incurred claim provisions resulted mostly from greater than anticipated coverage rescissions and claim denials. |
2009 | 2008 | 2007 | ||||||||||
Reserve increase(decrease): | ||||||||||||
General Insurance | $ | 7.4 | $ | 47.2 | $ | 256.9 | ||||||
Mortgage Guaranty | 582.8 | 737.7 | 395.3 | |||||||||
Title Insurance | (5.3 | ) | (14.5 | ) | (7.2 | ) | ||||||
Other | (.7 | ) | (2.5 | ) | 3.1 | |||||||
Total | $ | 584.3 | $ | 768.0 | $ | 648.3 | ||||||
(b) | Year end IBNR reserves carried in each segment were as follows: |
2009 | 2008 | 2007 | ||||||||||
General Insurance | $ | 1,621.6 | $ | 1,583.8 | $ | 1,539.0 | ||||||
Mortgage Guaranty | 39.7 | 33.0 | 20.8 | |||||||||
Title Insurance | 191.3 | 200.7 | 223.4 | |||||||||
Other | 9.4 | 9.0 | 11.8 | |||||||||
Total | $ | 1,862.0 | $ | 1,826.5 | $ | 1,795.0 | ||||||
F-18
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Statutory tax rate (credit) | (35.0 | )% | (35.0 | )% | 35.0 | % | ||||||
Tax rate increases (decreases): | ||||||||||||
Tax-exempt interest | (9.0 | ) | (3.1 | ) | (6.7 | ) | ||||||
Dividends received exclusion | (.6 | ) | (.4 | ) | (.9 | ) | ||||||
Valuation allowance (see below) | (19.8 | ) | 6.6 | — | ||||||||
Other items — net | .6 | .1 | .6 | |||||||||
Effective tax rate (credit) | (63.8 | )% | (31.8 | )% | 28.0 | % | ||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Deferred Tax Assets: | ||||||||||||
Losses, claims, and settlement expenses | $ | 209.1 | $ | 200.7 | $ | 207.6 | ||||||
Pension and deferred compensation plans | 47.7 | 46.5 | 27.9 | |||||||||
Impairment losses on investments | 127.6 | 124.5 | — | |||||||||
Other timing differences | 12.7 | 16.2 | 6.9 | |||||||||
Total deferred tax assets before valuation allowance | 397.1 | 388.1 | 242.5 | |||||||||
Valuation allowance on impaired assets | — | (54.0 | ) | — | ||||||||
Total deferred tax assets | 397.1 | 334.1 | 242.5 | |||||||||
Deferred Tax Liabilities: | ||||||||||||
Unearned premium reserves | 27.8 | 23.3 | 23.4 | |||||||||
Deferred policy acquisition costs | 67.2 | 73.5 | 80.2 | |||||||||
Mortgage guaranty insurers’ contingency reserves | 136.1 | 301.1 | 501.3 | |||||||||
Fixed maturity securities adjusted to cost | 6.0 | 7.2 | 9.3 | |||||||||
Net unrealized investment gains | 202.5 | 1.1 | 41.3 | |||||||||
Title plants and records | 5.0 | 5.0 | 4.4 | |||||||||
Total deferred tax liabilities | 444.6 | 411.4 | 660.3 | |||||||||
Net deferred tax liabilities | $ | 47.5 | $ | 77.3 | $ | 417.7 | ||||||
F-19
Table of Contents
F-20
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Projected benefit obligation at beginning of year | $ | 263.1 | $ | 242.0 | $ | 250.1 | ||||||
Increases (decreases) during the year attributable to: | ||||||||||||
Service cost | 7.9 | 7.9 | 9.6 | |||||||||
Interest cost | 15.9 | 15.3 | 15.2 | |||||||||
Actuarial (gains) losses | 8.0 | 8.6 | (22.6 | ) | ||||||||
Benefits paid | (10.3 | ) | (10.8 | ) | (10.4 | ) | ||||||
Change in plan provision | 1.2 | — | — | |||||||||
Net increase (decrease) for the year | 22.7 | 21.0 | (8.1 | ) | ||||||||
Projected benefit obligation at end of year | $ | 285.8 | $ | 263.1 | $ | 242.0 | ||||||
F-21
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Fair value of net assets available for plan benefits At beginning of the year | $ | 193.0 | $ | 219.9 | $ | 210.5 | ||||||
Increases (decreases) during the year attributable to: | ||||||||||||
Actual return on plan assets | 20.6 | (20.1 | ) | 14.9 | ||||||||
Sponsor contributions | 5.8 | 4.0 | 5.0 | |||||||||
Benefits paid | (10.3 | ) | (10.8 | ) | (10.4 | ) | ||||||
Administrative expenses | — | — | — | |||||||||
Net increase (decrease) for year | 16.1 | (26.9 | ) | 9.4 | ||||||||
Fair value of net assets available for plan benefits At end of the year | $ | 209.1 | $ | 193.0 | $ | 219.9 | ||||||
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Service cost | $ | 7.9 | $ | 7.9 | $ | 8.7 | ||||||
Interest cost | 15.9 | 15.3 | 14.1 | |||||||||
Expected return on plan assets | (15.5 | ) | (16.6 | ) | (16.0 | ) | ||||||
Recognized loss | 4.5 | .7 | 3.2 | |||||||||
Net cost | $ | 12.8 | $ | 7.4 | $ | 9.9 | ||||||
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Amounts arising during the period: | ||||||||||||
Net recognized gain (loss) | $ | (3.0 | ) | $ | (45.3 | ) | $ | 20.1 | ||||
Net prior service cost | (1.2 | ) | — | — | ||||||||
Reclassification adjustment to components of net periodic pension cost: | ||||||||||||
Net recognized loss | 4.5 | .7 | 3.2 | |||||||||
Net prior service cost | — | — | — | |||||||||
Net pretax amount recognized | $ | .3 | $ | (44.6 | ) | $ | 23.3 | |||||
As of December 31, | ||||||||
2009 | 2008 | |||||||
Net recognized loss | $ | (72.9 | ) | $ | (74.5 | ) | ||
Net prior service cost | (1.2 | ) | — | |||||
Total | $ | (74.1 | ) | $ | (74.5 | ) | ||
F-22
Table of Contents
As of | ||||
December 31, | ||||
2009 | ||||
Net recognized loss | $ | 4.7 | ||
Net prior service cost | .1 | |||
Total | $ | 4.8 | ||
As of December 31, | ||||||||
2009 | 2008 | |||||||
Settlement discount rates | 5.98 | % | 6.20 | % | ||||
Rates of compensation increase | 4.25 | % | 4.25 | % |
As of December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Settlement discount rates | 6.20 | % | 6.50 | % | 5.75 | % | ||||||
Rates of compensation increase | 4.25 | % | 4.25 | % | 3.92 | % | ||||||
Long-term rates of return on plans’ assets | 7.84 | % | 7.83 | % | 7.83 | % |
As of December 31, | ||||||||
2009 | 2008 | |||||||
Projected benefit obligations | $ | 285.8 | $ | 263.1 | ||||
Fair value of plan assets | $ | 209.1 | $ | 193.0 | ||||
As of December 31, | ||||||||
2009 | 2008 | |||||||
Projected benefit obligations | $ | 285.8 | $ | 263.1 | ||||
Accumulated benefit obligations | 256.5 | 234.8 | ||||||
Fair value of plan assets | $ | 209.1 | $ | 193.0 | ||||
F-23
Table of Contents
As of December 31, | Investment Policy Asset | |||||||||
2009 | 2008 | Allocation % Range Target | ||||||||
Equity securities: | ||||||||||
Common shares of Company stock | 11.0 | % | 14.1 | % | ||||||
Other | 45.1 | 41.6 | ||||||||
Sub-total | 56.1 | 55.7 | 30% to 70% | |||||||
Fixed maturity securities | 35.7 | 37.0 | 30% to 70% | |||||||
Other | 8.2 | 7.3 | 1% to 20% | |||||||
Total | 100.0 | % | 100.0 | % | ||||||
Fair Value Measurements as of December 31, 2009: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Equity maturity securities: | ||||||||||||||||
Common shares of Company stock | $ | 22.9 | $ | — | $ | — | $ | 22.9 | ||||||||
Other | 80.3 | 14.0 | — | 94.4 | ||||||||||||
Sub-total | 103.2 | 14.0 | — | 117.3 | ||||||||||||
Fixed maturity securities | — | 74.6 | — | 74.6 | ||||||||||||
Other | 4.9 | 3.2 | 9.0 | 17.1 | ||||||||||||
Total | $ | 108.2 | $ | 91.8 | $ | 9.0 | $ | 209.1 | ||||||||
F-24
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Employees Savings and Stock Ownership Plan | $ | 5.4 | $ | 2.4 | $ | 2.5 | ||||||
Other profit sharing plans | 5.9 | 6.3 | 5.1 | |||||||||
Cash and deferred incentive compensation | $ | 16.0 | $ | 16.4 | $ | 24.2 | ||||||
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Numerator: | ||||||||||||
Net Income (loss) | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | ||||
Numerator for basic earnings per share — income (loss) available to common shareholders | (99.1 | ) | (558.3 | ) | 272.4 | |||||||
Numerator for diluted earnings per share — income (loss) available to common shareholders after assumed conversions | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | ||||
Denominator: | ||||||||||||
Denominator for basic earnings per share — weighted-average shares(a)(b) | 235,657,425 | 231,484,083 | 231,370,242 | |||||||||
Effect of dilutive securities — stock options | — | — | 1,542,486 | |||||||||
Effect of dilutive securities — convertible senior notes | — | — | — | |||||||||
Denominator for diluted earnings per share - adjusted weighted-average shares and assumed conversions(a)(b) | 235,657,425 | 231,484,083 | 232,912,728 | |||||||||
F-25
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Earnings per share: | ||||||||||||
Basic | $ | (.42 | ) | $ | (2.41 | ) | $ | 1.18 | ||||
Diluted | $ | (.42 | ) | $ | (2.41 | ) | $ | 1.17 | ||||
Anti-dilutive outstanding stock option awards excluded from earning per share computations: | ||||||||||||
Stock options | 15,781,176 | 15,279,782 | 4,864,000 | |||||||||
Convertible senior notes | 27,452,271 | — | — | |||||||||
Total | 43,233,447 | 15,279,782 | 4,864,000 | |||||||||
(a) | All per share statistics have been restated to reflect all stock dividends or splits declared through December 31, 2009. | |
(b) | In calculating earnings per share, pertinent accounting rules require that common shares owned by the Company’s Employee Savings and Stock Ownership Plan that are as yet unallocated to participants in the plan be excluded from the calculation. Such shares are issued and outstanding, have the same voting and other rights applicable to all other common shares, and may be sold at any time by the plan. |
2009 | 2008 | 2007 | ||||||||||
Stock based compensation expense | $ | 4.9 | $ | 8.0 | $ | 10.5 | ||||||
Income tax benefit | $ | 1.7 | $ | 2.8 | $ | 3.6 | ||||||
F-26
Table of Contents
2009 | 2008 | 2007 | ||||||||||
Expected volatility | .28 | .21 | .19 | |||||||||
Expected dividends | 7.74 | % | 6.29 | % | 3.56 | % | ||||||
Expected term (in years) | 7 | 7 | 7 | |||||||||
Risk-free rate | 2.56 | % | 3.05 | % | 4.43 | % | ||||||
As of and for the Years Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Shares | Price | Shares | Price | Shares | Price | |||||||||||||||||||
Outstanding at beginning of year | 15,279,782 | $ | 17.81 | 14,570,577 | $ | 18.12 | 13,282,329 | $ | 17.26 | |||||||||||||||
Granted | 989,250 | 10.48 | 1,505,000 | 12.94 | 2,329,000 | 21.78 | ||||||||||||||||||
Exercised | 71,493 | 6.79 | 222,795 | 10.21 | 932,593 | 14.98 | ||||||||||||||||||
Forfeited and canceled | 416,363 | 14.28 | 573,000 | 15.82 | 108,159 | 19.47 | ||||||||||||||||||
Outstanding at end of year | 15,781,176 | 17.49 | 15,279,782 | 17.81 | 14,570,577 | 18.12 | ||||||||||||||||||
Exercisable at end of year | 11,892,055 | $ | 17.77 | 10,311,431 | $ | 17.21 | 8,919,827 | $ | 16.38 | |||||||||||||||
Weighted average fair value of options granted during the year(a) | $1.05 per share | $1.18 per share | $3.73 per share |
(a) | Based on the Black-Scholes option pricing model and the assumptions outlined above. |
Options Outstanding | Options Exercisable | |||||||||||||||||||||||
Weighted — Average | Weighted | |||||||||||||||||||||||
Year(s) | Remaining | Average | ||||||||||||||||||||||
of | Number | Contractual | Exercise | Number | Exercise | |||||||||||||||||||
Ranges of Exercise Prices | Grant | Outstanding | Life | Price | Exercisable | Price | ||||||||||||||||||
$6.40 to $7.23 | 2000 | 333,509 | 0.25 | $ | 6.40 | 333,509 | $ | 6.40 | ||||||||||||||||
$14.36 | 2001 | 1,178,308 | 1.25 | 14.36 | 1,168,613 | 14.36 | ||||||||||||||||||
$16.85 | 2002 | 1,456,094 | 2.25 | 16.85 | 1,456,094 | 16.85 | ||||||||||||||||||
$14.37 | 2003 | 1,462,442 | 3.25 | 14.37 | 1,462,442 | 14.37 | ||||||||||||||||||
$19.32 to $20.02 | 2004 | 2,239,749 | 4.25 | 19.33 | 2,239,749 | 19.33 | ||||||||||||||||||
$18.41 to $20.87 | 2005 | 1,913,549 | 5.25 | 18.44 | 1,913,549 | 18.44 | ||||||||||||||||||
$21.36 to $22.35 | 2006 | 2,431,475 | 6.25 | 22.00 | 1,754,056 | 21.99 | ||||||||||||||||||
$21.78 to $23.16 | 2007 | 2,274,175 | 7.25 | 21.78 | 1,090,026 | 21.78 | ||||||||||||||||||
$7.73 to $12.95 | 2008 | 1,504,000 | 8.25 | 12.94 | 375,230 | 12.94 | ||||||||||||||||||
$10.48 | 2009 | 987,875 | 9.25 | 10.48 | 98,785 | 10.48 | ||||||||||||||||||
Total | 15,781,176 | $ | 17.49 | 11,892,055 | $ | 17.77 | ||||||||||||||||||
F-27
Table of Contents
2009 | 2008 | 2007 | ||||||||||
Cash received from stock option exercise | $ | .5 | $ | 2.2 | $ | 13.9 | ||||||
Intrinsic value of stock options exercised | .3 | .9 | 5.1 | |||||||||
Actual tax benefit realized for tax deductions from stock options exercised | $ | .1 | $ | .3 | $ | 1.7 | ||||||
Note 2 — | Debt |
December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
8% Convertible Senior Notes due 2012 | $ | 316.2 | $ | 358.9 | $ | — | $ | — | ||||||||
Commercial paper due within 180 days with an average yield of — % and 2.65%, respectively | — | — | 199.5 | 199.5 | ||||||||||||
ESSOP debt with an average yield of 3.85% and 5.41%, respectively, (Note 3(b)) | 27.9 | 27.9 | 29.5 | 29.5 | ||||||||||||
Other miscellaneous debt | 2.5 | 2.5 | 3.8 | 3.8 | ||||||||||||
Total debt | $ | 346.7 | $ | 389.4 | $ | 233.0 | $ | 233.0 | ||||||||
Note 3 — | Shareholders’ Equity |
F-28
Table of Contents
Convertible | ||||
Series G(a) | ||||
Preferred Stock Series: | ||||
Annual cumulative dividend rate per share | $ | (a | ) | |
Conversion ratio of preferred into common shares | 1 for .95 | |||
Conversion right begins | Anytime | |||
Redemption and liquidation value per share | (a | ) | ||
Redemption beginning in year | (a | ) | ||
Total redemption value (millions) | (a | ) | ||
Vote per share | one | |||
Shares outstanding: | ||||
December 31, 2008 | 0 | |||
December 31, 2009 | 0 | |||
(a) | The Company has authorized up to 1,000,000 shares of Series G Convertible Preferred Stock for issuance pursuant to the Company’s Stock Option Plan. Series G had been issued under the designation “G-2”. As of December 31, 2003, all Series “G-2” had been converted into shares of common stock. In 2001, the Company created a new designation, “G-3”, from which no shares have been issued as of December 31, 2009. Management believes this designation will be the source of possible future issuances of Series G stock. Except as otherwise stated, Series “G-2” and Series “G-3” are collectively referred to as Series “G”. Each share of Series G pays a floating rate dividend based on the prime rate of interest. At December 31, 2009, the annual dividend rate for Series “G-3” would have been 34 cents per share. Each share of Series G is convertible at any time, after being held six months, into .95 shares of Common Stock. Unless previously converted, Series G shares may be redeemed at the Company’s sole option five years after their issuance. |
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Note 4 — | Commitments and Contingent Liabilities: |
F-30
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F-31
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
General Insurance Group | ||||||||||||
Written premiums: | ||||||||||||
Direct | $ | 2,380.7 | $ | 2,655.7 | $ | 2,685.2 | ||||||
Assumed | 10.4 | 15.2 | 61.5 | |||||||||
Ceded | $ | 670.7 | $ | 704.2 | $ | 634.7 | ||||||
Earned premiums: | ||||||||||||
Direct | $ | 2,432.1 | $ | 2,702.0 | $ | 2,644.7 | ||||||
Assumed | 16.3 | 29.1 | 173.4 | |||||||||
Ceded | $ | 666.0 | $ | 741.8 | $ | 663.0 | ||||||
Claims ceded | $ | 433.0 | $ | 451.8 | $ | 366.2 | ||||||
Mortgage Guaranty Group | ||||||||||||
Written premiums: | ||||||||||||
Direct | $ | 634.0 | $ | 708.6 | $ | 637.9 | ||||||
Assumed | — | — | — | |||||||||
Ceded | $ | 4.0 | $ | 106.5 | $ | 95.1 | ||||||
Earned premiums: | ||||||||||||
Direct | $ | 648.6 | $ | 698.4 | $ | 612.7 | ||||||
Assumed | .2 | .3 | .4 | |||||||||
Ceded | $ | 4.3 | $ | 106.3 | $ | 94.9 | ||||||
Claims ceded | $ | 173.7 | $ | 199.4 | $ | 1.9 | ||||||
Insurance in force as of December 31: | ||||||||||||
Direct | $ | 108,884.9 | $ | 128,267.5 | $ | 124,738.4 | ||||||
Assumed | 895.0 | 1,435.1 | 1,737.1 | |||||||||
Ceded | $ | 2,933.9 | $ | 7,425.2 | $ | 7,419.7 | ||||||
F-32
Table of Contents
F-33
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Note 5 — | Consolidated Quarterly Results — Unaudited |
F-34
Table of Contents
1st | 2nd | 3rd | 4th | |||||||||||||
Quarter | Quarter | Quarter(*) | Quarter | |||||||||||||
Year Ended December 31, 2009: | ||||||||||||||||
Operating Summary: | ||||||||||||||||
Net premiums, fees, and other income | $ | 785.0 | $ | 818.4 | $ | 944.4 | $ | 865.6 | ||||||||
Net investment income and realized gains (losses) | 93.4 | 94.0 | 95.8 | 106.4 | ||||||||||||
Total revenues | 878.5 | 912.6 | 1,040.2 | 972.2 | ||||||||||||
Benefits, claims, and expenses | 971.3 | 998.3 | 1,069.4 | 1,038.2 | ||||||||||||
Net income (loss) | $ | (53.9 | ) | $ | (15.8 | ) | $ | 7.4 | $ | (36.7 | ) | |||||
Net income (loss) per share: | ||||||||||||||||
Basic | $ | (.23 | ) | $ | (.07 | ) | $ | .03 | $ | (.15 | ) | |||||
Diluted | $ | (.23 | ) | $ | (.07 | ) | $ | .03 | $ | (.15 | ) | |||||
Average shares outstanding: | ||||||||||||||||
Basic | 235,259,226 | 235,562,774 | 235,761,056 | 235,913,036 | ||||||||||||
Diluted | 235,259,226 | 235,562,774 | 235,878,936 | 235,913,036 | ||||||||||||
(*) | Third quarter results reflect the impact of the accounting treatment for certain reinsurance commutations. Refer to further discussion at Note 1(e). |
1st | 2nd | 3rd | 4th | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
Year Ended December 31, 2008: | ||||||||||||||||
Operating Summary: | ||||||||||||||||
Net premiums, fees, and other income | $ | 855.4 | $ | 844.1 | $ | 842.4 | $ | 804.6 | ||||||||
Net investment income and realized gains (losses) | 96.1 | (337.4 | ) | 100.5 | 31.5 | |||||||||||
Total revenues | 951.6 | 506.9 | 943.1 | 836.1 | ||||||||||||
Benefits, claims, and expenses | 991.3 | 1,024.9 | 1,016.5 | 1,024.1 | ||||||||||||
Net income | $ | (19.0 | ) | $ | (364.7 | ) | $ | (48.0 | ) | $ | (126.5 | ) | ||||
Net income per share: | ||||||||||||||||
Basic | $ | (.08 | ) | $ | (1.58 | ) | $ | (.21 | ) | $ | (.54 | ) | ||||
Diluted | $ | (.08 | ) | $ | (1.58 | ) | $ | (.21 | ) | $ | (.54 | ) | ||||
Average shares outstanding: | ||||||||||||||||
Basic | 230,495,852 | 230,702,352 | 230,735,600 | 233,763,723 | ||||||||||||
Diluted | 230,495,852 | 230,702,352 | 230,735,600 | 233,763,723 | ||||||||||||
F-35
Table of Contents
Note 6 — | Information About Segments of Business |
F-36
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
General Insurance: | ||||||||||||
Net premiums earned | $ | 1,782.5 | $ | 1,989.3 | $ | 2,155.1 | ||||||
Net investment income and other income | 270.1 | 266.6 | 282.9 | |||||||||
Total revenues before realized gains or losses | $ | 2,052.7 | $ | 2,255.9 | $ | 2,438.0 | ||||||
Income (loss) before taxes (credits) and realized investment gains or losses(a) | $ | 200.1 | $ | 294.3 | $ | 418.0 | ||||||
Income tax expense (credits) on above | $ | 52.2 | $ | 82.7 | $ | 126.5 | ||||||
Segment assets — at year end | $ | 9,920.8 | $ | 9,482.9 | $ | 9,769.9 | ||||||
Mortgage Guaranty(c): | ||||||||||||
Net premiums earned | $ | 644.5 | $ | 592.5 | $ | 518.2 | ||||||
Net investment income and other income | 101.6 | 97.5 | 90.1 | |||||||||
Total revenues before realized gains or losses | $ | 746.1 | $ | 690.0 | $ | 608.3 | ||||||
Income (loss) before taxes (credits) and realized investment gains or losses(a) | $ | (486.4 | ) | $ | (594.3 | ) | $ | (110.4 | ) | |||
Income tax expense (credits) on above | $ | (175.5 | ) | $ | (213.6 | ) | $ | (44.0 | ) | |||
Segment assets — at year end | $ | 3,233.4 | $ | 2,973.1 | $ | 2,523.8 | ||||||
Title Insurance: | ||||||||||||
Net premiums earned | $ | 611.0 | $ | 463.1 | $ | 638.5 | ||||||
Title, escrow and other fees | 277.4 | 192.9 | 212.1 | |||||||||
Sub-total | 888.4 | 656.1 | 850.7 | |||||||||
Net investment income and other income | 25.6 | 25.2 | 27.7 | |||||||||
Total revenues before realized gains or losses | $ | 914.1 | $ | 681.3 | $ | 878.5 | ||||||
Income (loss) before taxes (credits) and realized investment gains or losses(a) | $ | 2.1 | $ | (46.3 | ) | $ | (14.7 | ) | ||||
Income tax expense (credits) on above | $ | (.4 | ) | $ | (18.1 | ) | $ | (6.4 | ) | |||
Segment assets — at year end | $ | 852.8 | $ | 762.4 | $ | 770.4 | ||||||
Consolidated Revenues: | ||||||||||||
Total revenues of above Company segments | $ | 3,712.9 | $ | 3,627.4 | $ | 3,925.0 | ||||||
Other sources(b) | 138.1 | 132.1 | 131.4 | |||||||||
Consolidated net realized investment gains (losses) | 6.3 | (486.4 | ) | 70.3 | ||||||||
Consolidation elimination adjustments | (53.8 | ) | (35.3 | ) | (35.8 | ) | ||||||
Consolidated revenues | $ | 3,803.6 | $ | 3,237.7 | $ | 4,091.0 | ||||||
Consolidated Income (Loss) Before Taxes (Credits): | ||||||||||||
Total income (loss) before income taxes (credits) and realized investment gains or losses of above Company segments | $ | (284.0 | ) | $ | (346.3 | ) | $ | 292.9 | ||||
Other sources — net(b) | 4.0 | 13.5 | 15.1 | |||||||||
Consolidated net realized investment gains (losses) | 6.3 | (486.4 | ) | 70.3 | ||||||||
Consolidated income (loss) before income taxes (credits) | $ | (273.6 | ) | $ | (819.2 | ) | $ | 378.4 | ||||
Consolidated Income Tax Expense (Credits): | ||||||||||||
Total income tax expense (credits) for above Company segments | $ | (123.7 | ) | $ | (148.9 | ) | $ | 75.9 | ||||
Other sources — net(b) | .9 | 4.3 | 5.3 | |||||||||
Income tax expense (credits) on consolidated net realized investment gains (losses) | (51.7 | ) | (116.1 | ) | 24.6 | |||||||
Consolidated income tax expense (credits) | $ | (174.4 | ) | $ | (260.8 | ) | $ | 105.9 | ||||
F-37
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
Consolidated Assets: | ||||||||
Total assets for above Company segments | $ | 14,007.0 | $ | 13,218.6 | ||||
Other assets(b) | 503.5 | 509.5 | ||||||
Consolidation elimination adjustments | (320.5 | ) | (462.0 | ) | ||||
Consolidated assets | $ | 14,190.0 | $ | 13,266.0 | ||||
In the above tables, net premiums earned on a GAAP basis differ slightly from statutory amounts due to certain differences in calculations of unearned premium reserves under each accounting method. | ||
(a) | Income (loss) before taxes (credits) is reported net of interest charges on intercompany financing arrangements with Old Republic’s holding company parent for the following segments: General — $17.9, $14.2, and $15.4 for the years ended December 31, 2009, 2008 and 2007, respectively; Mortgage — $7.2 for the year ended December 31, 2009; and Title — $5.5, $2.6, and $2.3 for the years ended December 31, 2009, 2008, and 2007, respectively. | |
(b) | Represents amounts for Old Republic’s holding company parent, minor corporate services subsidiaries, and a small life and health insurance operation. | |
(c) | 2009 results reflect the impact of the accounting treatment for certain reinsurance commutations. Refer to further discussion at Note 1(e). |
F-38
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F-39
Table of Contents
Schedule | I | — | Summary of Investments — Other than Investments in Related Parties as of December 31, 2009 | |||||
Schedule | II | — | Condensed Financial Information of Registrant as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008, and 2007 | |||||
Schedule | III | — | Supplementary Insurance Information for the years ended December 31, 2009, 2008 and 2007 | |||||
Schedule | IV | — | Reinsurance for the years ended December 31, 2009, 2008 and 2007 | |||||
Schedule | V | — | Valuation and Qualifying Accounts for the years ended December 31, 2009, 2008 and 2007 | |||||
Schedule | VI | — | Supplemental Information Concerning Property - Casualty Insurance Operations for the years ended December 31, 2009, 2008 and 2007 |
F-40
Table of Contents
FINANCIAL STATEMENT SCHEDULES
F-41
Table of Contents
SCHEDULE I — SUMMARY OF INVESTMENTS — OTHER THAN INVESTMENTS IN
RELATED PARTIES
As of December 31, 2009
Column A | Column B | Column C | Column D | |||||||||
Amount at | ||||||||||||
Which Shown | ||||||||||||
in Balance | ||||||||||||
Type of Investment | Cost(1) | Fair Value | Sheet | |||||||||
($ in millions) | ||||||||||||
Available for sale: | ||||||||||||
Fixed maturity securities: | ||||||||||||
United States Government and government agencies and authorities | $ | 780.0 | $ | 810.5 | $ | 810.5 | ||||||
States, municipalities and political subdivisions | 2,209.3 | 2,344.0 | 2,344.0 | |||||||||
Foreign government | 157.3 | 163.4 | 163.4 | |||||||||
Corporate, industrial and all other | 4,749.4 | 5,008.7 | 5,008.7 | |||||||||
7,896.2 | $ | 8,326.8 | 8,326.8 | |||||||||
Equity securities: | ||||||||||||
Non-redeemable preferred stocks | — | $ | — | — | ||||||||
Common stocks: | ||||||||||||
Banks, trusts and insurance companies | 107.3 | 260.5 | 260.5 | |||||||||
Industrial, miscellaneous and all other | 32.4 | 33.2 | 33.2 | |||||||||
Indexed mutual funds | 217.6 | 209.0 | 209.0 | |||||||||
357.5 | $ | 502.9 | 502.9 | |||||||||
Short-term investments | 826.7 | 826.7 | ||||||||||
Miscellaneous investments | 24.0 | 24.0 | ||||||||||
Total | 9,104.6 | 9,680.5 | ||||||||||
Other investments | 7.8 | 7.8 | ||||||||||
Total Investments | $ | 9,112.4 | $ | 9,688.4 | ||||||||
(1) | Represents original cost of equity securities, net ofother-than-temporary impairment adjustments of $317.3, and as to fixed maturities, original cost reduced by repayments and adjusted for amortization of premium or accrual of discount. |
F-42
Table of Contents
SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
OLD REPUBLIC INTERNATIONAL CORPORATION (PARENT COMPANY)
December 31, | ||||||||
2009 | 2008 | |||||||
($ in millions) | ||||||||
Assets: | ||||||||
Bonds and notes | $ | 20.5 | $ | 20.5 | ||||
Short-term investments | 58.3 | 129.1 | ||||||
Investments in, and indebtedness of related parties | 4,207.6 | 3,978.6 | ||||||
Other assets | 58.0 | 47.3 | ||||||
Total Assets | $ | 4,344.5 | $ | 4,175.7 | ||||
Liabilities and Common Shareholders’ Equity: | ||||||||
Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 90.2 | $ | 95.0 | ||||
Debt and debt equivalents | 344.2 | 29.5 | ||||||
Indebtedness to affiliates and subsidiaries | 18.6 | 310.7 | ||||||
Commitments and contingent liabilities | ||||||||
Total Liabilities | 453.1 | 435.3 | ||||||
Common Shareholders’ Equity: | ||||||||
Common stock | 240.6 | 240.5 | ||||||
Additional paid-in capital | 412.4 | 405.0 | ||||||
Retained earnings | 2,927.3 | 3,186.5 | ||||||
Accumulated other comprehensive income (loss) | 353.7 | (41.7 | ) | |||||
Unallocated ESSOP shares (at cost) | (42.7 | ) | (50.0 | ) | ||||
Total Common Shareholders’ Equity | 3,891.4 | 3,740.3 | ||||||
Total Liabilities and Common Shareholders’ Equity | $ | 4,344.5 | $ | 4,175.7 | ||||
F-43
Table of Contents
SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
OLD REPUBLIC INTERNATIONAL CORPORATION (PARENT COMPANY)
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in millions) | ||||||||||||
Revenues: | ||||||||||||
Investment income from subsidiaries | $ | 33.0 | $ | 19.6 | $ | 22.4 | ||||||
Real estate and other income | 4.1 | 4.2 | 4.1 | |||||||||
Other investment income | .9 | 2.4 | 2.1 | |||||||||
Total revenues | 38.1 | 26.4 | 28.8 | |||||||||
Expenses: | ||||||||||||
Interest — subsidiaries | 2.9 | 3.8 | 3.0 | |||||||||
Interest — other | 20.1 | .1 | 3.7 | |||||||||
Real estate and other expenses | 3.7 | 3.6 | 3.3 | |||||||||
General expenses, taxes and fees | 10.7 | 11.5 | 13.9 | |||||||||
Total expenses | 37.6 | 19.1 | 24.1 | |||||||||
Revenues, net of expenses | .5 | 7.2 | 4.6 | |||||||||
Federal income taxes (credits) | (.3 | ) | 2.2 | 1.6 | ||||||||
Income (loss) before equity in earnings (losses) of subsidiaries | .8 | 5.0 | 3.0 | |||||||||
Equity in Earnings (Losses) of Subsidiaries: | ||||||||||||
Dividends received | 181.5 | 191.2 | 175.8 | |||||||||
Earnings (losses) in excess of dividends | (281.5 | ) | (754.6 | ) | 93.6 | |||||||
Net Income (Loss) | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | ||||
F-44
Table of Contents
SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
OLD REPUBLIC INTERNATIONAL CORPORATION (PARENT COMPANY)
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
($ in millions) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | (99.1 | ) | $ | (558.3 | ) | $ | 272.4 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Accounts receivable | .3 | (.1 | ) | — | ||||||||
Income taxes — net | (5.0 | ) | 26.0 | 17.0 | ||||||||
Excess of equity in net (income) loss of subsidiaries over cash dividends received | 281.5 | 754.2 | (93.6 | ) | ||||||||
Accounts payable, accrued expenses and other | 2.8 | 9.1 | (.6 | ) | ||||||||
Total | 180.4 | 230.8 | 195.3 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of: | ||||||||||||
Fixed maturity securities | — | (12.6 | ) | — | ||||||||
Fixed assets for company use | (2.3 | ) | — | (.6 | ) | |||||||
Net repayment (issuance) of notes receivable with related parties | (188.2 | ) | (118.1 | ) | 65.8 | |||||||
Net decrease (increase) in short-term investments | 70.7 | (92.7 | ) | (33.7 | ) | |||||||
Investment in, and indebtedness of relatedparties-net | — | (77.1 | ) | — | ||||||||
Total | (119.8 | ) | (300.8 | ) | 31.5 | |||||||
Cash flows from financing activities: | ||||||||||||
Issuance of debt | 306.7 | 30.0 | — | |||||||||
Net issuance (repayment) of notes and loans to related parties | (205.9 | ) | 159.1 | 46.1 | ||||||||
Issuance of preferred and common stock | 1.4 | 86.1 | 15.0 | |||||||||
Redemption of debentures and notes | (2.0 | ) | (.4 | ) | (115.0 | ) | ||||||
Unallocated ESSOP shares | — | (50.0 | ) | — | ||||||||
Dividends on common shares | (160.0 | ) | (155.2 | ) | (145.4 | ) | ||||||
Purchase of treasury stock | — | — | (28.3 | ) | ||||||||
Other — net | (.8 | ) | .3 | .2 | ||||||||
Total | (60.6 | ) | 70.0 | (227.3 | ) | |||||||
Increase (decrease) in cash | — | — | (.4 | ) | ||||||||
Cash, beginning of year | — | — | .4 | |||||||||
Cash, end of year | $ | — | $ | — | $ | — | ||||||
F-45
Table of Contents
F-46
Table of Contents
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Deferred | Losses, | Other | ||||||||||||||||||
Policy | Claims and | Policyholders’ | ||||||||||||||||||
Acquisition | Settlement | Unearned | Benefits and | Premium | ||||||||||||||||
Segment | Costs | Expenses | Premiums | Funds | Revenue | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Year Ended December 31, 2009: | ||||||||||||||||||||
Insurance Underwriting: | ||||||||||||||||||||
General Insurance Group | $ | 136.2 | $ | 3,334.3 | $ | 825.8 | $ | 84.5 | $ | 1,782.5 | ||||||||||
Mortgage Insurance Group | 34.1 | 1,965.4 | 74.9 | — | 644.5 | |||||||||||||||
Title Insurance Group | — | 277.1 | — | 5.7 | 611.0 | |||||||||||||||
Corporate & Other(1) | 36.5 | 21.5 | — | 57.7 | 73.3 | |||||||||||||||
Reinsurance Recoverable(2) | — | 2,316.5 | 137.4 | 37.2 | — | |||||||||||||||
Consolidated | $ | 206.9 | $ | 7,915.0 | $ | 1,038.1 | $ | 185.2 | $ | 3,111.5 | ||||||||||
Year Ended December 31, 2008: | ||||||||||||||||||||
Insurance Underwriting: | ||||||||||||||||||||
General Insurance Group | $ | 147.7 | $ | 3,326.9 | $ | 889.9 | $ | 85.3 | $ | 1,989.3 | ||||||||||
Mortgage Insurance Group | 38.0 | 1,382.6 | 89.4 | — | 592.5 | |||||||||||||||
Title Insurance Group | — | 282.4 | — | 2.2 | 463.1 | |||||||||||||||
Corporate & Other(1) | 37.0 | 22.2 | — | 57.2 | 80.1 | |||||||||||||||
Reinsurance Recoverable(2) | — | 2,227.0 | 132.9 | 35.7 | — | |||||||||||||||
Consolidated | $ | 222.8 | $ | 7,241.3 | $ | 1,112.2 | $ | 180.7 | $ | 3,125.1 | ||||||||||
�� | ||||||||||||||||||||
Year Ended December 31, 2007: | ||||||||||||||||||||
Insurance Underwriting: | ||||||||||||||||||||
General Insurance Group | $ | 158.5 | $ | 3,279.7 | $ | 931.9 | $ | 85.9 | $ | 2,155.1 | ||||||||||
Mortgage Insurance Group | 42.9 | 644.9 | 79.8 | — | 518.2 | |||||||||||||||
Title Insurance Group | — | 296.9 | — | 1.7 | 638.5 | |||||||||||||||
Corporate & Other(1) | 44.9 | 24.7 | — | 64.2 | 77.0 | |||||||||||||||
Reinsurance Recoverable(2) | — | 1,984.7 | 170.4 | 38.3 | — | |||||||||||||||
Consolidated | $ | 246.5 | $ | 6,231.1 | $ | 1,182.2 | $ | 190.2 | $ | 3,389.0 | ||||||||||
(1) | Represents amounts for Old Republic’s holding company parent, minor corporate services subsidiaries and a small life & health insurance operation. | |
(2) | In accordance with GAAP, reinsured losses and unearned premiums are to be reported as assets. Assets and liabilities were, as a result, increased by corresponding amounts of approximately $2.4 billion, $2.3 billion and $2.1 billion at December 31, 2009, 2008 and 2007, respectively. This accounting treatment does not have any effect on the Company’s results of operations. |
F-47
Table of Contents
Column A | Column G | Column H | Column I | Column J | Column K | |||||||||||||||
Benefits, | Amortization | |||||||||||||||||||
Claims, | of Deferred | |||||||||||||||||||
Net | Losses and | Policy | Other | |||||||||||||||||
Investment | Settlement | Acquisition | Operating | Premiums | ||||||||||||||||
Segment | Income | Expenses | Costs | Expenses | Written | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Year Ended December 31, 2009: | ||||||||||||||||||||
Insurance Underwriting: | ||||||||||||||||||||
General Insurance Group | $ | 258.9 | $ | 1,360.3 | $ | 280.0 | $ | 212.1 | $ | 1,720.4 | ||||||||||
Mortgage Insurance Group | 92.0 | 1,134.1 | 35.4 | 62.9 | 630.0 | |||||||||||||||
Title Insurance Group | 25.2 | 70.3 | — | 841.6 | 611.0 | |||||||||||||||
Corporate & Other(1) | 7.2 | 34.1 | 20.2 | 25.8 | 72.9 | |||||||||||||||
Reinsurance Recoverable(2) | — | — | — | — | — | |||||||||||||||
Consolidated | $ | 383.5 | $ | 2,598.9 | $ | 335.7 | $ | 1,142.5 | $ | 3,034.4 | ||||||||||
Year Ended December 31, 2008: | ||||||||||||||||||||
Insurance Underwriting: | ||||||||||||||||||||
General Insurance Group | $ | 253.6 | $ | 1,452.3 | $ | 294.9 | $ | 214.2 | $ | 1,966.6 | ||||||||||
Mortgage Insurance Group | 86.8 | 1,180.7 | 38.7 | 64.9 | 602.0 | |||||||||||||||
Title Insurance Group | 25.1 | �� | 45.6 | — | 681.9 | 463.1 | ||||||||||||||
Corporate & Other(1) | 11.6 | 36.8 | 24.2 | 22.1 | 77.4 | |||||||||||||||
Reinsurance Recoverable(2) | — | — | — | — | — | |||||||||||||||
Consolidated | $ | 377.3 | $ | 2,715.7 | $ | 357.8 | $ | 983.3 | $ | 3,109.4 | ||||||||||
Year Ended December 31, 2007: | ||||||||||||||||||||
Insurance Underwriting: | ||||||||||||||||||||
General Insurance Group | $ | 260.8 | $ | 1,461.4 | $ | 340.2 | $ | 218.2 | $ | 2,112.0 | ||||||||||
Mortgage Insurance Group | 79.0 | 615.8 | 39.5 | 63.4 | 542.9 | |||||||||||||||
Title Insurance Group | 27.3 | 56.0 | — | 837.2 | 638.5 | |||||||||||||||
Corporate & Other(1) | 12.7 | 32.9 | 22.8 | 24.7 | 78.4 | |||||||||||||||
Reinsurance Recoverable(2) | — | — | — | — | — | |||||||||||||||
Consolidated | $ | 379.9 | $ | 2,166.2 | $ | 402.5 | $ | 1,143.7 | $ | 3,372.0 | ||||||||||
(1) | Represents amounts for Old Republic’s holding company parent, minor corporate services subsidiaries and a small life & health insurance operation. | |
(2) | In accordance with GAAP, reinsured losses and unearned premiums are to be reported as assets. Assets and liabilities were, as a result, increased by corresponding amounts of approximately $2.4 billion, $2.3 billion and $2.1 billion at December 31, 2009, 2008 and 2007, respectively. This accounting treatment does not have any effect on the Company’s results of operations. |
F-48
Table of Contents
Column A | Column B | Column C | Column D | Column E | Column F | |||||||||||||||
Percentage | ||||||||||||||||||||
Ceded | Assumed | of Amount | ||||||||||||||||||
Gross | to Other | from Other | Net | Assumed | ||||||||||||||||
Amount | Companies | Companies | Amount | to Net | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Year Ended December 31, 2009: | ||||||||||||||||||||
Life insurance in force | $ | 11,302.6 | $ | 5,876.2 | $ | — | $ | 5,426.3 | — | % | ||||||||||
Premium Revenues: | ||||||||||||||||||||
General Insurance | $ | 2,432.1 | $ | 666.0 | $ | 16.3 | $ | 1,782.5 | .9 | % | ||||||||||
Mortgage Insurance | 648.6 | 4.3 | .2 | 644.5 | — | |||||||||||||||
Title Insurance | 605.2 | .1 | 5.9 | 611.0 | 1.0 | |||||||||||||||
Life and Health Insurance: | ||||||||||||||||||||
Life insurance | 28.7 | 13.1 | — | 15.6 | — | |||||||||||||||
Accident and health insurance | 74.6 | 16.8 | — | 57.7 | — | |||||||||||||||
Total Life & Health Insurance | 103.4 | 30.0 | — | 73.3 | — | |||||||||||||||
Consolidating adjustments | — | — | — | — | — | |||||||||||||||
Consolidated | $ | 3,789.5 | $ | 700.5 | $ | 22.5 | $ | 3,111.5 | .7 | % | ||||||||||
Year Ended December 31, 2008: | ||||||||||||||||||||
Life insurance in force | $ | 12,485.5 | $ | 6,434.6 | $ | — | $ | 6,050.8 | — | % | ||||||||||
Premium Revenues: | ||||||||||||||||||||
General Insurance | $ | 2,702.0 | $ | 741.8 | $ | 29.1 | $ | 1,989.3 | 1.5 | % | ||||||||||
Mortgage Insurance | 698.4 | 106.3 | .3 | 592.5 | .1 | |||||||||||||||
Title Insurance | 460.2 | .1 | 3.1 | 463.1 | .7 | |||||||||||||||
Life and Health Insurance: | ||||||||||||||||||||
Life insurance | 32.1 | 14.4 | — | 17.7 | — | |||||||||||||||
Accident and health insurance | 76.1 | 13.7 | — | 62.3 | — | |||||||||||||||
Total Life & Health Insurance | 108.3 | 28.2 | — | 80.1 | — | |||||||||||||||
Consolidating adjustments | — | — | — | — | — | |||||||||||||||
Consolidated | $ | 3,969.0 | $ | 876.5 | $ | 32.6 | $ | 3,125.1 | 1.0 | % | ||||||||||
Year Ended December 31, 2007: | ||||||||||||||||||||
Life insurance in force | $ | 13,873.4 | $ | 7,064.8 | $ | — | $ | 6,808.5 | — | % | ||||||||||
Premium Revenues: | ||||||||||||||||||||
General Insurance | $ | 2,644.7 | $ | 663.0 | $ | 173.4 | $ | 2,155.1 | 8.0 | % | ||||||||||
Mortgage Insurance | 612.7 | 94.9 | .4 | 518.2 | .1 | |||||||||||||||
Title Insurance | 635.9 | — | 2.7 | 638.5 | .4 | |||||||||||||||
Life and Health Insurance: | ||||||||||||||||||||
Life insurance | 32.8 | 15.6 | — | 17.2 | — | |||||||||||||||
Accident and health insurance | 74.9 | 15.1 | — | 59.7 | — | |||||||||||||||
Total Life & Health Insurance | 107.8 | 30.7 | — | 77.0 | — | |||||||||||||||
Consolidating adjustments | — | — | — | — | — | |||||||||||||||
Consolidated | $ | 4,001.1 | $ | 788.7 | $ | 176.6 | $ | 3,389.0 | 5.2 | % | ||||||||||
F-49
Table of Contents
Column A | Column B | Column C | Column D | Column E | ||||||||||||||||
Additions | ||||||||||||||||||||
Charged | ||||||||||||||||||||
Balance at | Charged to | to Other | Balance at | |||||||||||||||||
Beginning of | Costs and | Accounts — | Deductions — | End of | ||||||||||||||||
Description | Period | Expenses | Describe | Describe | Period | |||||||||||||||
($ in millions) | ||||||||||||||||||||
Year Ended December 31, 2009: | ||||||||||||||||||||
Deducted from Asset Accounts: | ||||||||||||||||||||
Reserve for unrecoverable reinsurance | $ | 28.2 | $ | — | $ | — | $ | — | $ | 28.2 | ||||||||||
Deferred tax asset valuation Allowance(1) | $ | 54.0 | $ | — | $ | — | $ | (54.0 | ) | $ | — | |||||||||
Year Ended December 31, 2008: | ||||||||||||||||||||
Deducted from Asset Accounts: | ||||||||||||||||||||
Reserve for unrecoverable reinsurance | $ | 28.7 | $ | (.4 | ) | $ | — | $ | — | $ | 28.2 | |||||||||
Deferred tax asset valuation Allowance(1) | $ | — | $ | 54.0 | $ | — | $ | — | $ | 54.0 | ||||||||||
Year Ended December 31, 2007: | ||||||||||||||||||||
Deducted from Asset Accounts: | ||||||||||||||||||||
Reserve for unrecoverable reinsurance | $ | 30.2 | $ | (1.5 | ) | $ | — | $ | — | $ | 28.7 | |||||||||
(1) | A valuation allowance of $54.0 was established against a deferred tax asset related to the Company’s realized losses on investments at December 31, 2008. As of December 31, 2009, this valuation allowance was eliminated following an increase in the fair value of the Company’s investment portfolio. |
F-50
Table of Contents
SCHEDULE VI — SUPPLEMENTAL INFORMATION CONCERNING
PROPERTY-CASUALTY INSURANCE OPERATIONS
For the years ended December 31, 2009, 2008 and 2007
Column A | Column B | Column C | Column D | Column E | ||||||||||||
Reserves | ||||||||||||||||
for Unpaid | ||||||||||||||||
Deferred | Claims | Discount, | ||||||||||||||
Policy | and Claim | If Any, | ||||||||||||||
Acquisition | Adjustment | Deducted in | Unearned | |||||||||||||
Affiliation With Registrant(1) | Costs | Expenses(2) | Column C | Premiums(2) | ||||||||||||
($ in millions) | ||||||||||||||||
Year Ended December 31: | ||||||||||||||||
2009 | $ | 136.2 | $ | 3,334.3 | $ | 143.9 | $ | 825.8 | ||||||||
2008 | 147.7 | 3,326.9 | 156.8 | 889.9 | ||||||||||||
2007 | 158.5 | 3,279.7 | 148.5 | 931.9 |
Column A | Column F | Column G | Column H | |||||||||||||
Claims and Claim | ||||||||||||||||
Adjustment Expenses | ||||||||||||||||
Net | Incurred Related to | |||||||||||||||
Earned | Investment | Current | Prior | |||||||||||||
Affiliation With Registrant(1) | Premiums | Income | Year | Years | ||||||||||||
Year Ended December 31: | ||||||||||||||||
2009 | $ | 1,782.5 | $ | 258.9 | $ | 1,409.2 | $ | (56.8 | ) | |||||||
2008 | 1,989.3 | 253.6 | 1,520.1 | (83.0 | ) | |||||||||||
2007 | 2,155.1 | 260.8 | 1,562.8 | (110.6 | ) |
Column A | Column I | Column J | Column K | |||||||||
Amortization | Paid | |||||||||||
of Deferred | Claims | |||||||||||
Policy | and Claim | |||||||||||
Acquisition | Adjustment | Premiums | ||||||||||
Affiliation With Registrant(1) | Costs | Expenses | Written | |||||||||
Year Ended December 31: | ||||||||||||
2009 | $ | 280.0 | $ | 1,345.0 | $ | 1,720.4 | ||||||
2008 | 294.9 | 1,389.8 | 1,966.6 | |||||||||
2007 | 340.2 | 1,195.0 | 2,112.0 |
(1) | Includes consolidated property-casualty entities. The amounts relating to the Company’s unconsolidated property-casualty subsidiaries and the proportionate share of the registrant’s and its subsidiaries’ 50%-or-less owned property-casualty equity investees are immaterial and have, therefore, been omitted from this schedule. | |
(2) | See note (2) to Schedule III. |
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Table of Contents
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
($ in millions, except share data) | ||||||||
ASSETS | ||||||||
Investments: | ||||||||
Available for sale: | ||||||||
Fixed maturity securities (at fair value) (amortized cost: $7,877.1 and $7,896.2) | $ | 8,352.2 | $ | 8,326.8 | ||||
Equity securities (at fair value) (adjusted cost: $358.6 and $357.5) | 631.4 | 502.9 | ||||||
Short-term investments (at fair value which approximates cost) | 783.5 | 826.7 | ||||||
Miscellaneous investments | 23.9 | 24.0 | ||||||
Total | 9,791.2 | 9,680.5 | ||||||
Other investments | 7.3 | 7.8 | ||||||
Total investments | 9,798.5 | 9,688.4 | ||||||
Other Assets: | ||||||||
Cash | 74.9 | 77.3 | ||||||
Securities and indebtedness of related parties | 11.2 | 17.1 | ||||||
Accrued investment income | 112.5 | 113.3 | ||||||
Accounts and notes receivable | 794.4 | 788.6 | ||||||
Federal income tax recoverable: | ||||||||
Current | .4 | 7.3 | ||||||
Prepaid federal income taxes | 136.0 | 221.4 | ||||||
Reinsurance balances and funds held | 130.7 | 141.9 | ||||||
Reinsurance recoverable: | ||||||||
Paid losses | 75.9 | 66.7 | ||||||
Policy and claim reserves | 2,519.9 | 2,491.2 | ||||||
Deferred policy acquisition costs | 202.0 | 206.9 | ||||||
Sundry assets | 384.0 | 369.3 | ||||||
4,442.3 | 4,501.6 | |||||||
Total Assets | $ | 14,240.9 | $ | 14,190.0 | ||||
LIABILITIES, PREFERRED STOCK, AND COMMON SHAREHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Losses, claims, and settlement expenses | $ | 7,774.8 | $ | 7,915.0 | ||||
Unearned premiums | 1,041.7 | 1,038.1 | ||||||
Other policyholders’ benefits and funds | 185.8 | 185.2 | ||||||
Total policy liabilities and accruals | 9,002.3 | 9,138.4 | ||||||
Commissions, expenses, fees, and taxes | 267.8 | 266.3 | ||||||
Reinsurance balances and funds | 335.8 | 321.3 | ||||||
Federal income tax payable: Deferred | 102.8 | 47.5 | ||||||
Debt | 347.2 | 346.7 | ||||||
Sundry liabilities | 188.8 | 178.0 | ||||||
Commitments and contingent liabilities | ||||||||
Total Liabilities | 10,245.0 | 10,298.6 | ||||||
Preferred Stock(1) | — | — | ||||||
Common Shareholders’ Equity: | ||||||||
Common stock(1) | 241.0 | 240.6 | ||||||
Additional paid-in capital | 416.2 | 412.4 | ||||||
Retained earnings | 2,911.8 | 2,927.3 | ||||||
Accumulated other comprehensive income (loss) | 468.3 | 353.7 | ||||||
Unallocated ESSOP shares (at cost) | (41.5 | ) | (42.7 | ) | ||||
Treasury stock (at cost)(1) | — | — | ||||||
Total Common Shareholders’ Equity | 3,995.8 | 3,891.4 | ||||||
Total Liabilities, Preferred Stock and Common Shareholders’ Equity | $ | 14,240.9 | $ | 14,190.0 | ||||
(1) | At March 31, 2010 and December 31, 2009, there were 75,000,000 shares of $0.01 par value preferred stock authorized, of which no shares were outstanding. As of the same dates, there were 500,000,000 shares of common stock, $1.00 par value, authorized, of which 241,029,255 at March 31, 2010 and 240,685,448 at December 31, 2009 were issued. At March 31, 2010 and December 31, 2009, there were 100,000,000 shares of Class B Common Stock, $1.00 par value, authorized, of which no shares were issued. There were no common shares classified as treasury stock as of March 31, 2010 and December 31, 2009. |
F-53
Table of Contents
Quarters Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
($ in millions, except share data) | ||||||||
Revenues: | ||||||||
Net premiums earned | $ | 752.3 | $ | 721.8 | ||||
Title, escrow, and other fees | 76.1 | 55.6 | ||||||
Total premiums and fees | 828.5 | 777.4 | ||||||
Net investment income | 96.2 | 93.4 | ||||||
Other income | 4.8 | 7.6 | ||||||
Total operating revenues | 929.6 | 878.5 | ||||||
Realized investment gains (losses): | ||||||||
From sales | 2.9 | — | ||||||
From impairments | — | — | ||||||
Total realized investment gains (losses) | 2.9 | — | ||||||
Total revenues | 932.6 | 878.5 | ||||||
Benefits, Claims and Expenses: | ||||||||
Benefits, claims and settlement expenses | 491.6 | 649.2 | ||||||
Dividends to policyholders | 2.5 | 2.8 | ||||||
Underwriting, acquisition, and other expenses | 400.6 | 318.6 | ||||||
Interest and other charges | 6.5 | .6 | ||||||
Total expenses | 901.3 | 971.3 | ||||||
Income (loss) before income taxes (credits) | 31.2 | (92.7 | ) | |||||
Income Taxes (Credits): | ||||||||
Current | 11.4 | 24.7 | ||||||
Deferred | (5.2 | ) | (63.5 | ) | ||||
Total | 6.2 | (38.8 | ) | |||||
Net Income (Loss) | $ | 25.0 | $ | (53.9 | ) | |||
Net Income (Loss) Per Share: | ||||||||
Basic: | $ | .11 | $ | (.23 | ) | |||
Diluted: | $ | .11 | $ | (.23 | ) | |||
Average shares outstanding: | ||||||||
Basic | 236,387,779 | 235,259,226 | ||||||
Diluted | 236,462,231 | 235,259,226 | ||||||
Dividends Per Common Share: | ||||||||
Cash: | $ | .1725 | $ | .1700 | ||||
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Quarters Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
($ in millions) | ||||||||
Net income (loss) as reported | $ | 25.0 | $ | (53.9 | ) | |||
Other comprehensive income (loss): | ||||||||
Post-tax net unrealized gains (losses) on securities | 111.5 | (9.8 | ) | |||||
Other adjustments | 3.1 | .5 | ||||||
Net adjustments | 114.6 | (9.2 | ) | |||||
Comprehensive income (loss) | $ | 139.7 | $ | (63.1 | ) | |||
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Quarters Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
($ in millions) | ||||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 25.0 | $ | (53.9 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Deferred policy acquisition costs | 5.3 | 6.1 | ||||||
Premiums and other receivables | (1.7 | ) | (11.4 | ) | ||||
Unpaid claims and related items | (144.5 | ) | 118.3 | |||||
Other policyholders’ benefits and funds | (21.3 | ) | (22.0 | ) | ||||
Income taxes | 1.7 | (40.8 | ) | |||||
Prepaid federal income taxes | 85.4 | 241.9 | ||||||
Reinsurance balances and funds | 16.4 | 13.9 | ||||||
Realized investment (gains) losses | (2.9 | ) | — | |||||
Accounts payable, accrued expenses and other | 17.2 | 11.2 | ||||||
Total | (19.3 | ) | 263.3 | |||||
Cash flows from investing activities: | ||||||||
Fixed maturity securities: | ||||||||
Maturities and early calls | 169.1 | 208.8 | ||||||
Sales | 68.9 | 6.9 | ||||||
Sales of: | ||||||||
Other investments | 1.0 | .3 | ||||||
Purchases of: | ||||||||
Fixed maturity securities | (221.3 | ) | (232.6 | ) | ||||
Equity securities | (1.0 | ) | — | |||||
Other — net | (5.7 | ) | (4.4 | ) | ||||
Net decrease (increase) in short-term investments | 43.5 | (194.9 | ) | |||||
Other-net | 2.9 | .2 | ||||||
Total | 57.4 | (215.6 | ) | |||||
Cash flows from financing activities: | ||||||||
Issuance of debentures and notes | 70.0 | 60.0 | ||||||
Issuance of common shares | 2.3 | .3 | ||||||
Redemption of debentures and notes | (72.5 | ) | (72.3 | ) | ||||
Dividends on common shares | (40.6 | ) | (39.9 | ) | ||||
Other-net | .3 | .1 | ||||||
Total | (40.5 | ) | (51.8 | ) | ||||
Increase (decrease) in cash: | (2.3 | ) | (4.2 | ) | ||||
Cash, beginning of period | 77.3 | 63.9 | ||||||
Cash, end of period | $ | 74.9 | $ | 59.7 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 1.2 | $ | 1.2 | ||||
Income taxes | $ | 4.4 | $ | 2.0 | ||||
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1. | Accounting Policies and Basis of Presentation: |
2. | Common Share Data: |
Quarters Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Numerator: | ||||||||
Net Income (loss) | $ | 25.0 | $ | (53.9 | ) | |||
Numerator for basic earnings per share — income (loss) available to common shareholders | 25.0 | (53.9 | ) | |||||
Numerator for diluted earnings per share — income (loss) available to common shareholders after assumed conversions | $ | 25.0 | $ | (53.9 | ) | |||
Denominator: | ||||||||
Denominator for basic earnings per share — weighted-average shares(a)(b) | 236,387,779 | 235,259,226 | ||||||
Effect of dilutive securities — stock options | 74,452 | — | ||||||
Effect of dilutive securities — convertible senior notes | — | — | ||||||
Denominator for diluted earnings per share — adjusted weighted-average shares and assumed conversions(a)(b) | 236,462,231 | 235,259,226 | ||||||
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Quarters Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Earnings per share: | ||||||||
Basic | $ | .11 | $ | (.23 | ) | |||
Diluted | $ | .11 | $ | (.23 | ) | |||
Anti-dilutive common share equivalents excluded from earning per share computations: | ||||||||
Stock options | 14,432,230 | 16,030,334 | ||||||
Convertible senior notes | 27,458,280 | — | ||||||
Total | 41,890,510 | 16,030,334 | ||||||
(a) | All per share statistics have been restated to reflect all stock dividends and splits declared through March 31, 2010. | |
(b) | In calculating earnings per share, pertinent accounting rules require that common shares owned by the Company’s Employee Savings and Stock Ownership Plan that are as yet unallocated to participants in the plan be excluded from the calculation. Such shares are issued and outstanding, have the same voting and other rights applicable to all other common shares, and may be sold at any time by the plan. |
3. | Investments: |
F-58
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Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Fixed Maturity Securities: | ||||||||||||||||
March 31, 2010: | ||||||||||||||||
U.S. & Canadian Governments | $ | 920.4 | $ | 42.8 | $ | .6 | $ | 962.6 | ||||||||
Tax-exempt | 2,171.8 | 122.0 | — | 2,293.7 | ||||||||||||
Corporates | 4,784.9 | 317.9 | 7.0 | 5,095.8 | ||||||||||||
$ | 7,877.1 | $ | 482.8 | $ | 7.7 | $ | 8,352.2 | |||||||||
December 31, 2009: | ||||||||||||||||
U.S. & Canadian Governments | $ | 937.4 | $ | 39.6 | $ | 3.0 | $ | 974.0 | ||||||||
Tax-exempt | 2,209.3 | 135.0 | .3 | 2,344.0 | ||||||||||||
Corporates | 4,749.4 | 273.2 | 14.0 | 5,008.7 | ||||||||||||
$ | 7,896.2 | $ | 448.0 | $ | 17.4 | $ | 8,326.8 | |||||||||
Estimated | ||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
Fixed Maturity Securities: | ||||||||
Due in one year or less | $ | 858.1 | $ | 875.4 | ||||
Due after one year through five years | 4,189.6 | 4,433.8 | ||||||
Due after five years through ten years | 2,761.5 | 2,975.9 | ||||||
Due after ten years | 67.7 | 67.0 | ||||||
$ | 7,877.1 | $ | 8,352.2 | |||||
Gross | Gross | Estimated | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
March 31, 2010 | $ | 358.6 | $ | 281.0 | $ | 8.2 | $ | 631.4 | ||||||||
December 31, 2009 | $ | 357.5 | $ | 159.0 | $ | 13.7 | $ | 502.9 | ||||||||
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12 Months or Less | Greater Than 12 Months | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
March 31, 2010: | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
U.S. & Canadian Governments | $ | 138.9 | $ | .6 | $ | — | $ | — | $ | 138.9 | $ | .6 | ||||||||||||
Tax-exempt | 7.6 | — | — | — | 7.6 | — | ||||||||||||||||||
Corporates | 296.1 | 4.0 | 42.0 | 2.9 | 338.1 | 7.0 | ||||||||||||||||||
Subtotal | 442.7 | 4.8 | 42.0 | 2.9 | 484.7 | 7.7 | ||||||||||||||||||
Equity Securities | 23.1 | .3 | 97.0 | 7.9 | 120.2 | 8.2 | ||||||||||||||||||
Total | $ | 465.9 | $ | 5.1 | $ | 139.0 | $ | 10.8 | $ | 605.0 | $ | 16.0 | ||||||||||||
December 31, 2009: | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
U.S. & Canadian Governments | $ | 307.1 | $ | 3.0 | $ | — | $ | — | $ | 307.1 | $ | 3.0 | ||||||||||||
Tax-exempt | 13.9 | .2 | 3.1 | — | 17.1 | .3 | ||||||||||||||||||
Corporates | 302.5 | 5.1 | 139.3 | 8.9 | 441.8 | 14.0 | ||||||||||||||||||
Subtotal | 623.6 | 8.4 | 142.5 | 8.9 | 766.1 | 17.4 | ||||||||||||||||||
Equity Securities | 1.2 | .2 | 99.5 | 13.4 | 100.8 | 13.7 | ||||||||||||||||||
Total | $ | 624.9 | $ | 8.6 | $ | 242.1 | $ | 22.4 | $ | 867.0 | $ | 31.1 | ||||||||||||
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Fair Value Measurements as of March 31, 2010: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Available for sale: | ||||||||||||||||
Fixed maturity securities | $ | 345.4 | $ | 7,986.3 | $ | 20.5 | $ | 8,352.2 | ||||||||
Equity securities | 631.0 | .1 | .2 | 631.4 | ||||||||||||
Short-term investments | $ | 777.6 | $ | — | $ | 5.8 | $ | 783.5 |
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Quarters Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Investment income from: | ||||||||
Fixed maturity securities | $ | 94.3 | $ | 88.6 | ||||
Equity securities | .9 | 1.5 | ||||||
Short-term investments | .3 | 2.5 | ||||||
Other sources | 1.3 | 1.3 | ||||||
Gross investment income | 96.9 | 94.1 | ||||||
Investment expenses(a) | .7 | .7 | ||||||
Net investment income | $ | 96.2 | $ | 93.4 | ||||
Realized gains (losses) on: | ||||||||
Fixed maturity securities: | ||||||||
Gains | $ | 3.0 | $ | — | ||||
Losses | (.1 | ) | — | |||||
Net | 2.9 | — | ||||||
Equity securities & other long-term investments | — | — | ||||||
Total | 2.9 | — | ||||||
Income taxes (credits)(b) | 1.0 | — | ||||||
Net realized gains (losses) | $ | 1.9 | $ | — | ||||
Changes in unrealized investment gains (losses) on: | ||||||||
Fixed maturity securities | $ | 44.3 | $ | 83.2 | ||||
Less: Deferred income taxes (credits) | 15.5 | 29.1 | ||||||
Net change | $ | 28.7 | $ | 54.1 | ||||
Equity securities & other long-term investments | $ | 127.2 | $ | (83.1 | ) | |||
Less: Deferred income taxes (credits) | 44.5 | (19.1 | ) | |||||
Net change | $ | 82.7 | $ | (63.9 | ) | |||
(a) | Investment expenses consist of personnel costs and investment management and custody service fees, as well as a negligible amount of interest incurred on funds held. | |
(b) | Reflects primarily the combination of fully taxable realized investment gains or losses and judgments about the recoverability of deferred tax assets. |
4. | Pension Plans: |
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Table of Contents
5. | Information About Segments of Business: |
Quarters Ended March 31, | ||||||||
2010 | 2009 | |||||||
General Insurance Group: | ||||||||
Net premiums earned | $ | 411.8 | $ | 457.3 | ||||
Net investment income and other income | 67.3 | 66.3 | ||||||
Total revenues before realized gains or losses | $ | 479.1 | $ | 523.7 | ||||
Income (loss) before income taxes (credits) and realized investment gains or losses(a) | $ | 69.2 | $ | 58.2 | ||||
Income tax expense (credits) on above | $ | 21.1 | $ | 15.6 | ||||
Mortgage Guaranty Group: | ||||||||
Net premiums earned | $ | 136.2 | $ | 145.3 | ||||
Net investment income and other income | 24.2 | 25.9 | ||||||
Total revenues before realized gains or losses | $ | 160.5 | $ | 171.2 | ||||
Income (loss) before income taxes (credits) and realized investment gains or losses(a) | $ | (34.1 | ) | $ | (144.6 | ) | ||
Income tax expense (credits) on above | $ | (13.2 | ) | $ | (51.9 | ) | ||
Title Insurance Group: | ||||||||
Net premiums earned | $ | 179.0 | $ | 98.6 | ||||
Title, escrow and other fees | 76.1 | 55.6 | ||||||
Sub-total | 255.2 | 154.3 | ||||||
Net investment income and other income | 6.8 | 5.9 | ||||||
Total revenues before realized gains or losses | $ | 262.0 | $ | 160.2 | ||||
Income (loss) before income taxes (credits) and realized investment gains or losses(a) | $ | (8.6 | ) | $ | (9.0 | ) | ||
Income tax expense (credits) on above | $ | (3.2 | ) | $ | (3.5 | ) | ||
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Table of Contents
Quarters Ended March 31, | ||||||||
2010 | 2009 | |||||||
Consolidated Revenues: | ||||||||
Total revenues of above Company segments | $ | 901.7 | $ | 855.3 | ||||
Other sources(b) | 41.9 | 35.1 | ||||||
Consolidated net realized investment gains (losses) | 2.9 | — | ||||||
Consolidation elimination adjustments | (14.0 | ) | (11.9 | ) | ||||
Consolidated revenues | $ | 932.6 | $ | 878.5 | ||||
Consolidated Income (Loss) Before Taxes (Credits): | ||||||||
Total income (loss) before income taxes (credits) and realized investment gains or losses of above Company segments | $ | 26.5 | $ | (95.4 | ) | |||
Other sources — net(b) | 1.8 | 2.6 | ||||||
Consolidated net realized investment gains (losses) | 2.9 | — | ||||||
Consolidated income (loss) before income taxes (credits) | $ | 31.2 | $ | (92.7 | ) | |||
Quarters Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Consolidated Income Tax Expense (Credits): | ||||||||
Total income tax expense (credits) for above Company segments | $ | 4.6 | $ | (39.8 | ) | |||
Other sources — net(b) | .5 | .9 | ||||||
Income tax expense (credits) on consolidated net realized investment gains (losses) | 1.0 | — | ||||||
Consolidated income tax expense (credits) | $ | 6.2 | $ | (38.8 | ) | |||
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Consolidated Assets: | ||||||||
General | $ | 10,017.7 | $ | 9,920.8 | ||||
Mortgage | 3,083.1 | 3,233.4 | ||||||
Title | 857.3 | 852.8 | ||||||
Other assets(b) | 553.5 | 503.5 | ||||||
Consolidation elimination adjustments | (270.8 | ) | (320.5 | ) | ||||
Consolidated | $ | 14,240.9 | $ | 14,190.0 | ||||
(a) | Income (loss) before taxes (credits) is reported net of interest charges on intercompany financing arrangements with Old Republic’s holding company parent for the following segments: General — $5.3 and $2.6 for the quarters ended March 31, 2010 and 2009, respectively; Mortgage — $1.7 and $1.8 for the quarters ended March 31, 2010 and 2009, respectively; and Title — $1.3 and $.9 for the quarters ended March 31, 2010 and 2009, respectively. | |
(b) | Represents amounts for Old Republic’s holding company parent, minor corporate services subsidiaries, and a small life and health insurance operation. |
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Table of Contents
6. | Commitments and Contingent Liabilities: |
F-65
Table of Contents
7. | Debt: |
March 31, 2010 | December 31, 2009 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
8% Convertible Senior Notes due 2012 | $ | 316.2 | $ | 390.5 | $ | 316.2 | $ | 358.9 | ||||||||
ESSOP debt with an average yield of 3.73% and 3.85%, respectively | 25.8 | 25.8 | 27.9 | 27.9 | ||||||||||||
Other miscellaneous debt | 5.1 | 5.1 | 2.5 | 2.5 | ||||||||||||
Total debt | $ | 347.2 | $ | 421.5 | $ | 346.7 | $ | 389.4 | ||||||||
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Table of Contents
8. | Income Taxes: |
F-67
Table of Contents
among
PMA CAPITAL CORPORATION,
OLD REPUBLIC INTERNATIONAL CORPORATION
and
OR NEW CORP.
DATED AS OF JUNE 9, 2010
Table of Contents
ARTICLE I THE MERGER | A-1 | |||
1.1 | The Merger | A-1 | ||
1.2 | Effective Time | A-1 | ||
1.3 | Effects of the Merger | A-1 | ||
1.4 | Conversion of Stock | A-1 | ||
1.5 | Stock Options and Other Stock-Based Awards | A-2 | ||
1.6 | Articles of Incorporation | A-4 | ||
1.7 | Directors and Officers | A-4 | ||
1.8 | Tax Consequences | A-5 | ||
ARTICLE II DELIVERY OF MERGER CONSIDERATION | A-5 | |||
2.1 | Exchange Agent | A-5 | ||
2.2 | Deposit of Merger Consideration | A-5 | ||
2.3 | Delivery of Merger Consideration | A-5 | ||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY | A-7 | |||
3.1 | Corporate Organization | A-7 | ||
3.2 | Capitalization | A-8 | ||
3.3 | Authority; No Violation | A-9 | ||
3.4 | Consents and Approvals | A-9 | ||
3.5 | Reports; Regulatory Matters | A-10 | ||
3.6 | Financial Statements | A-11 | ||
3.7 | Broker’s Fees | A-12 | ||
3.8 | Absence of Certain Changes or Events | A-12 | ||
3.9 | Legal Proceedings | A-12 | ||
3.10 | Taxes and Tax Returns | A-13 | ||
3.11 | Employee Matters | A-14 | ||
3.12 | Compliance with Applicable Law | A-15 | ||
3.13 | Certain Contracts | A-15 | ||
3.14 | Investment Securities and Commodities | A-16 | ||
3.15 | Property | A-16 | ||
3.16 | Intellectual Property | A-17 | ||
3.17 | Environmental Liability | A-18 | ||
3.18 | Insurance Business Matters | A-18 | ||
3.19 | State Takeover Laws | A-20 | ||
3.20 | Interested Party Transactions | A-20 | ||
3.21 | Reorganization | A-20 | ||
3.22 | Opinion | A-21 | ||
3.23 | Company Information | A-21 | ||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT | A-21 | |||
4.1 | Corporate Organization | A-21 | ||
4.2 | Capitalization | A-21 | ||
4.3 | Authority; No Violation | A-22 | ||
4.4 | Consents and Approvals | A-22 | ||
4.5 | Reports; Regulatory Matters | A-23 |
A-i
Table of Contents
4.6 | Financial Statements | A-24 | ||
4.7 | Broker’s Fees | A-24 | ||
4.8 | Absence of Certain Changes or Events | A-25 | ||
4.9 | Legal Proceedings | A-25 | ||
4.10 | Taxes and Tax Returns | A-25 | ||
4.11 | Compliance with Applicable Law | A-25 | ||
4.12 | Certain Contracts | A-25 | ||
4.13 | Investment Securities and Commodities | A-25 | ||
4.14 | Intellectual Property | A-26 | ||
4.15 | Insurance Business Matters | A-26 | ||
4.16 | Reorganization; Approvals | A-27 | ||
4.17 | Parent Information | A-27 | ||
4.18 | Parent Ownership of Company Securities | A-27 | ||
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS | A-27 | |||
5.1 | Conduct of Business Prior to the Effective Time | A-27 | ||
5.2 | Forbearances | A-27 | ||
5.3 | Parent Forbearances | A-29 | ||
ARTICLE VI ADDITIONAL AGREEMENTS | A-29 | |||
6.1 | Regulatory Matters | A-29 | ||
6.2 | Access to Information | A-31 | ||
6.3 | Shareholder Approval | A-32 | ||
6.4 | NYSE Listing | A-32 | ||
6.5 | Maintenance of Tax-Free Reorganization | A-32 | ||
6.6 | Employee Matters | A-32 | ||
6.7 | Indemnification; Directors’ and Officers’ Insurance | A-33 | ||
6.8 | Additional Agreements | A-34 | ||
6.9 | Advise of Changes | A-34 | ||
6.10 | Exemption from Liability Under Section 16(b) | A-34 | ||
6.11 | No Solicitation | A-34 | ||
ARTICLE VII CONDITIONS PRECEDENT | A-36 | |||
7.1 | Conditions to Each Party’s Obligation to Effect the Merger | A-36 | ||
7.2 | Conditions to Obligations of Parent | A-37 | ||
7.3 | Conditions to Obligations of Company | A-38 | ||
ARTICLE VIII TERMINATION AND AMENDMENT | A-38 | |||
8.1 | Termination | A-38 | ||
8.2 | Effect of Termination | A-39 | ||
8.3 | Fees and Expenses | A-39 | ||
8.4 | Termination Fee | A-39 | ||
8.5 | Amendment | A-40 | ||
8.6 | Extension; Waiver | A-40 | ||
ARTICLE IX GENERAL PROVISIONS | A-40 | |||
9.1 | Closing | A-40 | ||
9.2 | Standard | A-40 | ||
9.3 | Non-survival of Representations, Warranties and Agreements | A-40 |
A-ii
Table of Contents
9.4 | Notices | A-41 | ||
9.5 | Interpretation | A-41 | ||
9.6 | Counterparts | A-42 | ||
9.7 | Entire Agreement | A-42 | ||
9.8 | Governing Law; Jurisdiction | A-42 | ||
9.9 | Publicity | A-42 | ||
9.10 | Assignment; Third Party Beneficiaries | A-42 | ||
9.11 | Specific Performance | A-43 |
A-iii
Table of Contents
Section | ||||
Adjusted Option | 1.5(a) | |||
Adjusted SAR | 1.5(b) | |||
Agreement | Preamble | |||
Alternative Proposal | 6.11(a)(i) | |||
Alternative Transaction | 6.11(a) | |||
Annual Bonus Plan | 1.5(e) | |||
Articles of Merger | 1.2(a) | |||
Bankruptcy and Equity Exception | 3.3(a) | |||
Cash Amount | 1.5(c) | |||
Certificate | 1.4(d) | |||
Change of Recommendation | 6.11(d) | |||
Change of Recommendation Notice | 6.11(d)(iii) | |||
Claim | 6.7(a) | |||
Closing | 9.1 | |||
Closing Date | 9.1 | |||
Code | Recitals | |||
Company | Preamble | |||
Company Articles | 3.1(b) | |||
Company Benefit Plans | 3.11(a) | |||
Company Bylaws | 3.1(b) | |||
Company Capitalization Date | 3.2(a) | |||
Company Common Stock | 1.4(b) | |||
Company Contract | 3.13(a) | |||
Company Deferred Stock Units | 1.5(d) | |||
Company Disclosure Schedule | Art. III | |||
Company IP | 3.17(a) | |||
Company LTIP | 1.5(e) | |||
Company Options | 1.5(a) | |||
Company Preferred Stock | 3.2(a) | |||
Company Regulatory Agreement | 3.5(b) | |||
Company Restricted Shares | 1.5(b) | |||
Company SARs | 1.5(b) | |||
Company SEC Reports | 3.5(c)(i) | |||
Confidentiality Agreement | 6.2(b) | |||
Controlled Group Liability | 3.11(f) | |||
Convertible Stock | 1.4(c) | |||
Covered Employees | 6.6(a) | |||
D & O Insurance | 6.7(c) | |||
DOJ | 6.1(d)(ii) | |||
DOS | 1.2 | |||
DPC Common Shares | 1.4(b) | |||
Effective Time | 1.2 | |||
Employees | 5.2(c)(i) | |||
End Date | 8.1(c) |
A-iv
Table of Contents
Section | ||||
ERISA | 3.11(a) | |||
ERISA Affiliate | 3.11(g) | |||
Excess Shares | 2.3(f)(ii) | |||
Exchange Act | 3.5(c)(i) | |||
Exchange Agent | 2.1 | |||
Exchange Agent Agreement | 2.1 | |||
Exchange Fund | 2.2 | |||
Exchange Ratio | 1.4(c) | |||
Expenses | 8.4(b) | |||
Form S-4 | 3.4(c) | |||
FTC | 6.1(d)(ii) | |||
GAAP | 3.1(c) | |||
Governmental Entity | 3.4(b) | |||
HSR Act | 3.4(e) | |||
Incentive Stock Option | 1.5(a) | |||
Indemnified Party | 6.7(a) | |||
Insurance Contracts | 3.18(d) | |||
Insurance Subsidiary | 3.18(a) | |||
Intellectual Property | 3.16(a) | |||
IRS | 3.10(a) | |||
Law | 6.1(i) | |||
Letter of Transmittal | 2.3(a)(i) | |||
License Agreement | 3.16(a) | |||
Licensed Company IP | 3.16(a) | |||
Licensed Parent IP | 4.14(a) | |||
Liens | 3.2(c) | |||
Material Adverse Effect | 3.8(a) | |||
Maximum Amount | 6.7(c) | |||
Merger | Recitals | |||
Merger Consideration | 1.4(c) | |||
Merger Sub | Preamble | |||
NYSE | 1.5(c) | |||
Owned Company IP | 3.16(a) | |||
Owned Parent IP | 4.14(a) | |||
Owned Properties | 3.15(a) | |||
Parent | Preamble | |||
Parent Bylaws | 4.3(b)(i) | |||
Parent Capitalization Date | 4.2 | |||
Parent Certificate | 4.3(b) | |||
Parent Common Stock | 1.4(c) | |||
Parent Contract | 4.12(a) | |||
Parent Deferred Stock Unit | 1.5(d) | |||
Parent Disclosure Schedule | Art. IV | |||
Parent Insurance Subsidiary | 4.15(a) | |||
Parent IP | 4.14(a) |
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Section | ||||
Parent Measurement Price | 1.4(c) | |||
Parent Preferred Stock | 4.2 | |||
Parent Regulatory Agreement | 4.5(b) | |||
Parent SEC Reports | 4.5(c)(i) | |||
Parent Stock Plans | 4.2 | |||
PBCL | 1.1 | |||
Performance Based Compensation Plans | 1.5(e) | |||
Permitted Encumbrances | 3.15(a)(iv) | |||
Pre-Termination Company Takeover Proposal Event | 8.4(b) | |||
Proxy Statement | 3.4(c) | |||
Real Property | 3.16(b) | |||
Regulatory Agencies | 3.5(a) | |||
Regulatory Approvals | 3.4 | |||
Regulatory Laws | 6.1(h) | |||
Reinsurance Contract | 3.18(g) | |||
SAP | 3.18(b) | |||
Sarbanes-Oxley Act | 3.5(c) | |||
SEC | 1.5(g) | |||
Securities Act | 3.2(a)(ii) | |||
Service Ratio | 1.5(d) | |||
Statutory Statements | 3.18(b) | |||
Subsidiary | 3.1(c) | |||
Superior Proposal | 6.11(d) | |||
Surviving Company | Recitals | |||
Takeover Statutes | 3.19 | |||
Tax | 3.10(h) | |||
Tax Return | 3.10(i) | |||
Taxes | 3.10(h) | |||
Termination Date | 8.1(c) | |||
Termination Fee | 8.4(a) | |||
Trust Account Common Shares | 1.4(b) | |||
Unaccelerated Company Restricted Shares | 1.5(b) | |||
Voting Debt | 3.2(a) |
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380 Sentry Parkway
Blue Bell, PA 19422
Attention: Executive Vice President and General Counsel
Facsimile:(610) 397-5144
1735 Market Street
Philadelphia, PA 19103
Attention: Justin P. Klein, Esq.
Facsimile:(215) 864-9166
Old Republic International Corporation 307 North Michigan Avenue Chicago, IL 60601 Attention: | Spencer LeRoy III, Senior Vice President, General Counsel Facsimile: 312/726-0309 |
Old Republic International Corporation 307 North Michigan Avenue Chicago, IL 60601 Attention: | Karl W. Mueller, Senior Vice President and Chief Financial Officer Facsimile: 312/726-0309 |
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By: | /s/ Vincent T. Donnelly |
Title: | President and Chief Executive Officer |
By: | /s/ Aldo C. Zucaro |
Title: | Chairman and Chief Executive Officer |
By: | /s/ Spencer LeRoy III |
Title: | Senior Vice President and Secretary |
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