Old Republic International Aktie

Thank you for standing by, and welcome to the Old Republic International First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

I'd now like to turn the call over to Joe Calabrese with the Financial Relations Board. You may begin.

Thank you, Rob. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss first quarter 2026 results. This morning, we distributed a copy press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at www.oldrepublic.com.

Please be advised that this call may involve forward-looking statements as discussed in the press release dated April 23, 2026. Assumptions, uncertainties and risks exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these assumptions, uncertainties and risks, please refer to the forward-looking statements discussion in the press release and the company's other recent SEC filings and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings. We may also include references to net income, excluding net investment gains or net operating income, a non-GAAP financial measure, in our remarks or in response to questions. GAAP reconciliations are included in the press release.

Presenting on today's conference call will be Craig Smiddy, President and CEO; Francis Sodaro, Chief Financial Officer; and Carolyn Monroe, President and CEO of Old Republic's National Title Insurance Group. Management will make some operating remarks, and then we'll open the line for your questions.

At this time, I'd like to turn the call over to Craig. Please go ahead, sir.

Okay. Joe, thank you very much. Good afternoon, everyone. Welcome again to Old Republic's First Quarter 2026 Earnings Call. In the quarter, we produced $211.5 million of consolidated pretax operating income compared to $252.7 million. And our consolidated combined ratio was 96.6% compared to 93.7%. For the quarter, our operating return on beginning equity was 11.5%, and growth in book value per share, including dividends, was 2.6%.

Specialty Insurance grew net premiums earned by 4.7% over the first quarter of '25 and produced $209 million of pretax operating income compared to $260 million. Specialty's combined ratio was 94.8% compared to 89.8%. Title Insurance grew premiums and fees by 12% over the first quarter of '25 and produced $16.7 million of pretax operating income compared to $4.3 million. Title's combined ratio was 100% compared to 102%. Our conservative reserving practices continue to produce favorable prior year loss development in both Specialty Insurance and Title Insurance, and Frank will provide more details on that topic.

So with that, Frank, I will turn the discussion over to you and then you can turn them back to me to cover Specialty Insurance and we'll have Carolyn cover Title Insurance.

Thank you, Craig, and good afternoon, everyone. In this morning's release, we reported net operating income of $171 million for the quarter compared to $202 million last year. On a per share basis, comparable quarter-over-quarter results were $0.68 compared to $0.81.

So starting with investments. Net investment income increased just over 4% in the quarter primarily as a result of a larger investment base and higher yields on the bond portfolio. While our average rate on corporate bonds acquired during the quarter was 4.7% and compared to the average yield rolling off of about 3.8%, the total bond portfolio book yield held fairly steady with year-end at about 4.75%. With the current interest rate environment, we expect net investment income growth to remain in the low to mid-single digits throughout the rest of 2026.

Turning now to loss reserves. Both Specialty and title insurance recognized favorable development in the quarter, leading to a 1.5 percentage point benefit on the consolidated loss ratio, compared to 2.6 points of benefit last year. While this level of favorable development was lower than we had experienced in recent years, it is within our expectations. For Specialty Insurance, property continued to have favorable development and led the way this quarter with a slightly higher level than last year. Commercial auto and workers' comp, a solid favorable development in the quarter. However, both were at lower levels than last year and general liability had a moderate amount of unfavorable development that spans several more recent accident years. It was partially offset by favorable development in older years.

We ended the quarter with book value per share of $24.53 and which inclusive of the regular dividend equated to an increase of 2.6% since year-end, resulting primarily from our operating earnings. In the quarter, we paid nearly $77 million in dividends and repurchased $161 million worth of our shares. Since the end of the quarter, we repurchased another $52 million worth of shares, which leaves us with about $640 million remaining in our current repurchase program.

I'll now turn the call back over to Craig for a discussion of Specialty Insurance.

Thanks, Frank. So Specialty Insurance net premiums written were up 3.4% in the quarter, coming from strong rate increases on commercial auto and general liability, some new business writings and increasing premium in our newer Specialty operating companies partially offset by a decline in our renewal retention ratios as we continue to prioritize rate in certain lines of coverage within our portfolio. We appear to be leading the market specifically within commercial auto by driving mid-teen rate increases.

As mentioned in my opening remarks, in the quarter, Specialty Insurance pretax operating income was $209 million, while the combined ratio was 94.8%. The loss ratio for the quarter was 63.6% and that included 1.6 percentage points of favorable prior year reserve development. And that compares to a 61.7% loss ratio in the first quarter last year, and that included 3.3 points of favorable development. The expense ratio for the quarter was 31.2%, and that compares to 28.1% in the first quarter last year. Our continued investments into new Specialty operating companies, technology modernization, data and analytics and AI placed some strain on the expense ratio this quarter. But we remain confident that all of these investments will provide significant long-term upside.

Turning to commercial auto, net premiums written were up just over 1% in the quarter, while the loss ratio came in relatively flat with the first quarter of last year at 70.4%. As I referred to earlier, rate increases remained steady with the fourth quarter that we reported, and that is at a 16% rate increase level which is in line with loss trends. Workers' comp, on the other hand, net written premiums were also up just over 1% in the quarter, while the loss ratio came in at 62.3% compared to 58.7% in the first quarter last year. And most of that difference is due to the difference in the level of favorable prior year loss reserve development. Rate decreases for work comp were about 2% and here too, that's in line with launch trends, with severity remaining relatively consistent and frequency continuing its downward trend.

So while we're seeing some top line pressure along with some pressure on the expense ratio, we remain confident that our underwriting approach to focus on risk adequate rates will continue to produce profitable combined ratios, which is really the foremost priority for us. We also expect to see continuing growth in top line contributions from our newer specialty operating companies.

A couple of other things. Additionally, in the quarter, we announced the formation of another new operating company, Old Republic property led by Patrick Hagerty, who has assembled a highly respected team of underwriters that will specialize in very selective property placements. Just this week, the executive team, they're at the holding company in Chicago, met with Patrick and his team, and they are currently focused on building out their operating platform. And ultimately, we expect this new venture to produce solid underwriting profits, very similar to what Old Republic Inland Marine has delivered over the last couple of years.

We also announced the rebranded Lodestar Claims and Risk Services, which is now set up as a separate, stand-alone operating company focused on growing fee income for our portfolio. And finally, as we mentioned in the release, we expect to close on the ECM acquisition around July 1, which will also contribute to top line and bottom line in the second half of this year. So that concludes my comments for Specialty and I'll now turn the discussion over to Carolyn to report on Title.

Thank you, Craig, and good afternoon. Title Insurance reported premium and fee revenue for the quarter of $678 million. This represents an increase of 12% from first quarter of last year. So far, in 2026, we have seen continued strong commercial activity. Consistent with prior years, the first quarter is seasonally slow in the residential market. The start of the 2026 home buying season was marked by higher inventory levels, lower interest rates and moderating price growth compared to 2025. While interest rates spiked during the last month of the quarter due to uncertainty and inflation concerns, they did ease slightly in April.

The premiums reduced in our direct title operations were up 6% from this time last year. Our agency produced premiums were up 14% and made up nearly 80% of our revenues during the quarter, which is up from 78% in the first quarter of last year. Commercial premiums increased this quarter and were 27% of our earned premiums this quarter compared to 24% in the first quarter of last year. During the quarter, we entered into a new excess of loss reinsurance agreement that will expand our capacity to underwrite large commercial deals.

Investment income was also up this quarter by 4% compared to first quarter of '25, driven by a higher invested asset base and higher investment yields. Our loss ratio improved to 2.6% this quarter including 1.1 percentage points of favorable prior year loss reserve development compared to 2.7% in first quarter of '25 that included a 0.8 percentage points of favorable development. Our expense ratio improved nearly 2 percentage points to 97.5% from 99.4% in the first quarter of '25. While our combined ratio of 100% is still elevated, the improvement reflects increased revenues and the margin expansion efforts we have been working on.

Our pretax operating income increased to $16.7 million this quarter compared to $4.3 million in the first quarter of '25. As we look forward to some long-awaited improvement in the residential housing market, we remain focused on operational efficiency and efforts to expand our margins. We're committed to equipping our agents with the latest fraud prevention tools and other technological solutions to help them succeed in all market conditions. Internally, we are busy continuing to execute on the rollout of our new operating platform across the Title operations. We are also progressing with ongoing enhancements to our commercial structure and enhancing our ability to service the elevated level of commercial transactions taking place in the market.

And with that, I'll give it back to Craig.

Okay. Carolyn, thank you. Well, that concludes our prepared remarks. So while we're seeing some top line pressure along with some expense pressure in Specialty Insurance, the fundamentals in Specialty remained very strong, and the investments we're making will contribute to continued profitable growth. And in Title, we're well positioned for a turn in the residential real estate market, while we continue to reduce expenses in the short term.

So with that, we're happy to answer questions. And either I'll answer your questions or I'll ask Frank or Carolyn to help me answer the question. So we'll open it up for questions.

[Operator Instructions] Your first question comes from the line of Paul Newsome from Piper Sandler.

Maybe just a little bit more color on the expense drag. Do you have any thoughts about when some of these new efforts will be able to directionally impact the expense ratio in a positive way? Is it something that we should expect to happen very gradually? Or is there some sort of moment when you think some of the stuff will kick in, in a meaningful way that we'll see in the results?

Yes, Paul. And thank you for the question. Happy to respond. Really, there's 2 main drivers that we referenced in the release, and that is the start-up operating company expenses. And then what I'll throw into a second category, even though there's 3 subsets and that is information technology with systems modernization, coupled with data and analytics, coupled with AI. So I'll speak first to the new start-up operating companies.

There's about 8 of the companies that we would put into the category of new, of which 3 of them are at a maturity level that we consider to be at scale. And then on the other end of the spectrum, we have new companies that have yet to produce premium. And the nature of the start-up businesses, of course, is the initial people that you're hiring are the new leaders of those companies and with that comes a higher level of compensation, of course. And therefore, it's a matter of time for all of the companies to get to scale.

So some in the middle will be reaching scale in the next year to 2 years. And then the latter 3 that haven't produced any premium yet, it's still 2 to 3 years out before they get to scale. So that's the dynamics around the start-up company expenses. It's a matter of where we will be at the end of the day. And again, the profitable businesses will be the end result.

When it comes to information technology, data analytics, AI. To give you some feel for that, about half of our 20 companies within the Specialty Insurance group are in the process of core system modernization. And as you may know, accounting rules are such that initial expenses need to be expensed immediately. And then so we're -- as we're at the beginning stages in a lot of these core system modernization efforts, a lot of the costs are falling directly to expense. Then in the midterm, we'll hit a point where we're able to capitalize certain costs and that happens when the system is ready for production. And at that point, we'll capitalize those costs and amortize those over a period of -- Frank, 10 years.

10 years on the core systems.

Yes. So that's what's happening there on data analytics. We build out a pretty significant team there. So I think we have most of the staff in place. AI, we're still building out that team. And there'll be more cost there to come. So a lot of moving pieces. I know hard to put it all together. But it will take a little bit of time for it all to get to, what I would call, a run rate that will be an expense ratio less than 30.

So I guess to put this all together, you had almost a 35% expense ratio in the first quarter, I think, 31% as you adjusted. Is that a kind of a good starting point for the following quarters? And then we should see some other efforts kick in over time, and it kind of goes away? Or is there anything on timing in there that should be -- we should consider?

Yes. I follow your question, Paul. I think, unfortunately, it's a hard one to answer because so much is also dependent on what's happening with premium. If we had a -- we can give a much more firm answer if we knew what exactly was going to happen with premium. But as you saw -- and as I mentioned a couple of times in my comments, while we still have some growth, if you look at net premiums written, they're coming in a bit lower than net premiums earned which is, of course, a leading indicator. And if you compare those growth rates to last year, their growth rates are lower than the robust growth rates we've had over the last couple of years.

So premiums, the wild card here. But with respect to just thinking about the expense ratio, if we can continue to grow at, say, a 3% to 5% clip for the rest of the year. I would think that an expense ratio that is at or below where we came in the first quarter is reasonable.

Your next question comes from the line of [ David Smart ] from Citizens.

This is David on for Matt. Just a question on the accident year loss ratio. It looks like you was booked in Q1, it was a couple of points lower. Can you help us just kind of understand how you got to that and any pieces to think about within that?

Yes. And David, just so get to make sure I answer your question correctly. When you're looking at the current accident year loss ratio for Specialty, and I'm looking at Page 2 of the supplement, we're at a 65.2% compared to a 65% last year. So the current accident -- last quarter last year, right? Okay. Are you comparing it to the full year?

Yes. Yes.

Okay. Thank you. I now understand your question.

Sorry about that.

No. It's perfect sense. Yes. So it's a bit lower in the first quarter than it was for the full year of '25. But as you can tell by comparing first quarter to first quarter, it's actually 0.2% up. So as we get through the year, it could be closer to where the full year '25 was. But starting with where it's at, even if we were to assume it stays at 65.2%, it's a bit better than it was. We've had cumulative compounded, rate increases in numerous lines of business. And on the other hand, on workers' comp, we've given up, frankly, less rate than trends would suggest we could give up.

So even if it were to stay at 65.2% for the rest of the year, coming in at 1.5 points better than where we were in the last couple of years, that is -- would be the rationale behind why that would make sense. And again, sticking to our underwriting discipline, we're willing to give up top line to maintain loss ratios. We're going out and pushing rate, particularly on commercial auto and general liability where we know we need it, even though a lot of others in the marketplace are still looking in the rearview mirror and not obtaining the rate that we know is necessary. So we're going to continue to get the rate we need relative to the trends that we're observing in order to maintain the loss ratios that we've been able to get to through our compounded rate increases or on the -- if you're talking about work comp through our very measured level of rate decreases.

[Operator Instructions] Your next question comes from the line of Greg Peters from Raymond James.

I'm going to focus on the commercial auto segment for my first question. And specifically, you talked about the continuing progress on rate increases in that line of business being in the double-digit range. And if I look at the written growth and the earned growth on a quarter-over-quarter basis, it doesn't seem to square with what seems to be strong pricing conditions for that line. So maybe you could give some perspective on what's going on, on the competitive front? Are you losing business? We hear anecdotally stories about MGA is getting more active in the space. We hear other carriers becoming more interested in the space. So just curious about how you see your top line results in commercial auto? And how you see the competitive outlook going forward?

Yes, Greg, great question. In my comments, in the release itself, we talked about the challenges that we're having with our retention ratios. I mean we're -- for us, what we call a challenge is probably for others, routine. But we've been able to maintain 85% to 90% retention ratios. That has slipped this quarter for sure. So we are -- by only growing the net written by 1% in commercial auto is a reflection of that lower retention ratio. And that's also ticks and ties to my comments that we're -- our MO is to require the rate increases needed to keep up with the severity trends that we're seeing and be disciplined underwriters and focus on bottom line, focus on loss ratio. And if top line is more muted than so be it.

But we think that there's competitors that, as I mentioned a little bit ago, I think look in the rearview mirror and aren't looking forward as best can look forward. If you observe for us, where we saw severity trends last quarter, and where we see them this quarter, they are almost identical, in the 15% range. And we're going out, and we have to get rate increases that are in that same range.

So competitors, there's -- MGAs, we're not competing with so much. So I know there is a lot of talk out there about MGAs. I wouldn't say that MGAs are a reason for our lower retention ratio. But there's a lot of other competitors. And I know I've talked about this on previous earnings calls, we pride ourselves on pricing precision and making sure we're on top of trends and reacting quickly and others just frankly aren't as good at that. And especially if they're relying on ISO data and ISOs not going to be as current as we are, and there are competitors out there that we think are willing to write commercial auto at levels that will ultimately be unprofitable.

And the proofs in the pudding, we've prided ourselves that we've been an outlier for the last 3 years or so putting up favorable development on commercial auto, while our competitors are putting up unfavorable development, a lot of them. And -- so if you then take what I'm saying about where we sit today in the competitive environment, they're going to continue to put up unfavorable development because they're not getting the rate they need to keep up with the trend. So it is competitive. It does not help that the trucking industry has been under pressure for the last several years when it comes to their margins.

And so they're under pressure and the continued need for rate is difficult for them. At the end of the day, it's all about legal system abuse, which we've talked about on prior calls. And the industry is very focused on it. I know we're working with the III, the Chamber of Commerce to educate the public that the plaintiff, attorneys and the litigation system abuse is costing everybody at the end of the day. But we have to deal with it, and we have to get the rate that is needed to pay for that abuse.

As I think about what you're talking about to has come to mind, you talked about profitability pressures for the trucking business. I'm just curious if you have a perspective given the recent jump up in gasoline and diesel prices, if that's -- is there any spillover consequence to your company?

And then secondly, on the competition side, is it risk management or that's being affected where you're losing share? Or is it the traditional risk transfer on -- speaking on the commercial auto piece.

Yes. So I'll answer the last part first. Yes, it is not our risk management, [ oleic ] risk management business. It's -- the majority of is coming from where we write most of our commercial auto, which is [ Great-West ]. And then we do write commercial auto in several of our other businesses as well. And similarly, there had to have challenges as well, trying to get the rate they need relative to the trend.

With regard to trucking, there's -- we're also very closely aligned with the Trucking Associations and Industry, and there was some reports that spot rates were improving and for the first time, maybe some indication that for them as an industry, maybe they had bottomed out. But then as you pointed out, then you turn around and add on top of that increased cost for them relative to higher diesel, fuel cost and gasoline costs.

And I don't know if that -- I don't know enough to tell you if the better rates that they might be getting are offsetting the higher fuel costs they have or not, but there's some indications so that maybe that industry will be better. But as I said in my earlier comments, it's not helpful when our clients are under pressures of their own, and we have to get more for our product as well. So it does create a challenge on the top line.

Yes. I've taken up more than my first share of time. But Carolyn, certainly want to ask you about your comments on commercial. And you highlighted the excess of loss reinsurance arrangement and the opportunity set for writing larger commercial accounts. Can you size that up for us as we think about the growth of your commercial business over the next 12 months? Or provide -- just give us some ideas of what you're thinking about when you talk about larger account opportunities.

Carolyn, I'll be happy to kick it off and then let you fill in. So we are seeing a large amount of opportunity on data centers, on energy production facilities, large accounts that actually require more than 1 title insurance company to co-insure the risk. And we wanted to be in a position to comfortably deploy limits that made us a significant contributor and participant on those statements. And that was a good reason behind why we decided to write, to put in place a reinsurance treaty to give us leak at night coverage, so to speak, to go ahead and write more large limit accounts. Because, again, the frequency at which we're seeing these opportunities has just continued to grow over the last 2 years.

And Carolyn, I'll turn it over to you to provide the details on what's happening there.

Sure. Yes, Greg, there are some states that tell us what our limit can be, but there's a lot of states that it's really just up to us. And that was a lot of the discussion behind getting this with just feeling a little more comfortable. We've spent a number of years growing our commercial presence, and it just became a time that it would really help us elevate what we were able to do in the commercial market. And we just really see commercial continuing to grow. Because if you think about it, there wasn't a lot of commercial during the pandemic years and really the 1.5 years coming out of that and commercial properties, something has to happen with them over 5 to 7 years. And so we're starting to see a lot of portfolio, projects come through, not just the data centers like Craig talked about, but a lot of other large projects that we just are a lot more comfortable taking on the risk now knowing that we have the reinsurance.

And there are no further questions. I will now turn the call back over to management for closing remarks.

Okay. Well, we're happy to have provided these comments and updates relative to the first quarter. We've got 3 more quarters to go for the year. So we're optimistic that things will continue to progress along as planned, and we'll continue to deliver solid profitability to our shareholders. So we look forward to seeing you at the end of the second quarter and give you another update and have another discussion. Thank you all very much. Have a good day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Old Republic International Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Joe Calabrese with MWW. Please go ahead.

Thank you, Regina. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss fourth quarter 2025 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at www.oldrepublic.com.

Please be advised that this call may involve forward-looking statements as discussed in the press release dated January 22, 2026. Assumptions, uncertainties and risks [indiscernible] that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these assumptions, uncertainties and risks, please refer to the forward-looking statements discussed in the press release and the company's other recent SEC filings, and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings.

We may also reference -- references to net income, excluding net investment gains, or net operating income, a non-GAAP financial measure in our remarks, or in our responses to questions. GAAP reconciliations are included in the press release.

Presenting on today's conference call will be Craig Smiddy, President and CEO; Frank Sodaro, Chief Financial Officer; and Carolyn Monroe, President and CEO of Old Republic National Title Insurance Group. Management will make some opening remarks, and then we'll open the line for your questions.

At this time, I'd like to turn the call over to Craig. Please go ahead, sir.

All right. Joe, thank you very much. Well, good afternoon, everyone, and welcome again to Old Republic's Fourth Quarter and Full Year 2025 earnings call.

In the fourth quarter, we produced $236 million of consolidated pretax operating income compared to $285 million, and our consolidated combined ratio was 96% compared to 92.7%. For the full year, we produced $1 billion of consolidated pretax operating income, and our consolidated combined ratio was [ 94.7% ]. Some other information on 2025. Our operating return on beginning equity was 14.1%, and growth in book value per share, including dividends, was 22%. And we think this reflects our strong operating earnings, our higher investment valuations and our sound capital management strategy.

In the fourth quarter, specialty insurance grew net premiums earned by 8.3% over the fourth quarter of '24. And for the full year, grew net premiums earned by 10.9%, and we eclipsed the $5 billion mark for the first time. In the fourth quarter, Specialty produced $178 million of pretax operating income, compared to $228 million, and Specialty's combined ratio was 97.3% compared to 91.8%. For the full year, Specialty produced $900 million of pretax operating income, another all-time high for us, and Specialty's combined ratio was 93.2%.

In the fourth quarter, Title grew premium and fees by 12.4% over the fourth quarter of '24. And for the full year, Title grew premium and fees by 9.1%. In the fourth quarter, Title also produced $65 million of pretax operating income, compared to $55.4 million, and Title's combined ratio was 94% compared to 94.4%. For the full year, Title produced $140 million of pretax operating income and Title's combined ratio was 97.6%.

Our conservative reserving practices where we're slow to release prior year reserves, but we react very quickly to increase reserves. We continue to produce favorable prior year loss reserve development in both Specialty Insurance and Title Insurance, and Frank will give you a little more color around that topic.

So with that, Frank, I'll go ahead and turn the discussion over to you. And then please turn things back to me. I'll discuss Specialty Insurance, and then I'll turn things over to Carolyn, who will discuss title, and then we'll wrap up and open it up for Q&A. So Frank?

Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $185 million for the quarter, compared to $227 million last year. On a per share basis, comparable quarter-over-quarter results were $0.74 compared to $0.90.

Starting with investments. Net investment income increased 7.9% in the quarter, primarily as a result of higher yields on the bond portfolio and to a lesser degree, a larger investment base. Our average reinvestment rate on corporate bonds acquired during the quarter was 4.6%, compared to the average yield rolling off of about 4.2%. The total bond portfolio book yield stands at 4.75%, compared to 4.5% at the end of last year. Now given the portfolio actions taken over the last few years that allowed us to accelerate improvement in the bond portfolio yield, our return of capital initiatives and the current interest rate environment, we expect net investment income growth to slow in 2026.

Turning now to loss reserves. Both Specialty Insurance and Title Insurance recognized favorable development in the quarter leading to a 2.4 percentage point benefit in the consolidated loss ratio, compared to 2.9 points last year. Within Specialty Insurance, Workers' comp prior year reserve development was slightly unfavorable in the quarter as a strong favorable development throughout the book was offset by a prior year reserve increase related to a credit loss on a single large deductible program. Commercial auto, general liability and property all had solid favorable development in the quarter.

Now for the full year, the Specialty Insurance loss ratio had a benefit of 2.9 points from favorable development, and there were no large pockets of unfavorable development to report. We ended the quarter with book value per share of $24.21, which inclusive of the regular and special dividends, equated to an increase of 22% for the full year, resulting primarily from our strong operating earnings and higher investment valuations. In the quarter, we declared nearly $700 million in dividends and repurchased $56 million worth of our shares. This brings total capital return this year to just over $1 billion, and it leaves us with about $850 million remaining in our current repurchase program.

I'll now turn the call back over to Craig for a discussion of Specialty Insurance.

Okay. Frank, thanks for that summary. Specialty Insurance net premiums written were up 6.1% in the quarter with strong rate increases on commercial auto and general liability, we also had solid renewal retention ratios, new business writings and increasing premium in our new Specialty operating companies. As a matter of fact, these new companies contributed over $300 million in net premium written in 2025 and collectively delivered positive operating income.

As I mentioned in my opening remarks, in the quarter, Specialty Insurance pretax operating income was $178 million, and the full year was $900 million, while the fourth quarter combined ratio was [ 97.3% ], and the full year was [ 93.2 ]. The loss ratio for the quarter was 67.6%, and that included 2.2 percentage points of favorable prior year loss reserve development. And that compares to 64.1% in the fourth quarter last year, which included 2.4 points of favorable development. The full year loss ratio was 63.9%, including 2.9 points of favorable development.

Moving to the expense ratio. For the quarter was 29.7%, compared to 27.7% in the fourth quarter last year. The full year expense ratio was 29.3% in line with expectations. And our continued investment into Specialty operating companies that we have recently launched, as well as in the technology modernization, data and analytics and AI does place some short-term strain on the expense ratio, but we're confident these investments will provide significant long-term upside potential.

Turning to commercial auto, net premiums written grew 6.4% in the quarter, while the loss ratio came in at 80%, compared to 77.9% in the fourth quarter last year. As we noted in the release, we increased the current accident year loss ratio by 3 percentage points, which for the year added 12 percentage points for the quarter, I should say. This action is consistent with what we've regularly communicated and that is that we reserve conservatively, and we're quick to react to increases in loss trends that we are observing. And those loss trends for commercial auto are now coming in a bit higher than we were observing earlier in 2025. And as such, as noted in the release, rate increases accelerated in the fourth quarter to 16% for commercial auto. And again, this would be in line with our philosophy of loss trends that are commensurate with rate increases.

Workers' comp net premiums written was 6% lower in the quarter while the loss ratio came in at 65.2%, compared to 35.5% in the fourth quarter last year. The big difference here is that the vast majority in the fourth quarter of '25 vis-a-vis the fourth quarter of 2024 is the significant difference in level of prior year favorable development. Rate decreases in work comp were about 3%. Here, too, in line with loss trends we're observing where severities remained very consistent and loss frequency continues its decline. So given positive wage trend that we apply our rates to relatively stable severity trend, and a declining loss frequency trend, we think our rates remain adequate even with a small level of rate decreases.

I'll also touch on property here. We had net premiums written, which increased 21% in the quarter, bringing the full year property writings to $750 million. The property loss ratio was 55% in the quarter, and that included some favorable prior year loss reserve development. It's of note that our property writings are diverse and often written on an E&S basis, particularly at our new Specialty operating companies.

So we expect solid growth and profitability in Specialty Insurance to continue through 2026, reflecting the growing contributions from our new Specialty operating companies, and also reflecting our commitment to underwriting excellence within all of our Specialty companies, including a keen focus on pricing discipline and cycle management. It's also noteworthy that our Specialty portfolio is now more diversified than it's ever been, which also helps set us up to successfully manage market cycles.

So I will now turn it over to you, Carolyn, to report on Title Insurance.

Thank you, Craig. Title reported premium and fee revenue for the quarter of $789 million. This represents an increase of 12% from fourth quarter of last year. The fourth quarter was our strongest of the year and is a continuation of the market story that we have been reporting all year. Seeing strong activity in the commercial sector and softness in the residential market, driven by persistent price and some affordability challenges still.

Premiums reduced in our direct Title operations were up 18% from this time last year. Our agency produced premiums were up 13%, and made up 77% of our revenue during the quarter, which is consistent with fourth quarter of last year. Commercial premiums increased this quarter and were 29% of our earned premiums compared to 23% in the fourth quarter of last year. For the year, our commercial premiums made up 26% of our earned premium, compared to 22% in 2024.

Investment income was also up this quarter by nearly 12% compared to the fourth quarter of 2024, primarily from higher investment yields. Our combined ratio improved to 94% this quarter, compared to 94.4% in the fourth quarter of last year. During the quarter, our continued expense management efforts and increased revenues resulted in a decrease in our operating expenses of 1.2%, relative to premium and fees. Our loss ratio increased to 0.8%. Although prior policy years continued to develop favorably, the amount of favorable development in the fourth quarter this year was less than in the fourth quarter of 2024.

Our pretax operating income this quarter was $66 million, compared to $55 million in the fourth quarter of last year. This 18% increase during the quarter brings our full year pretax income to $140 million for 2025. As we start 2026, the cornerstone of our business continues to be our Title agents. We remain focused on providing our agents with the innovative technological solutions required to maintain a competitive edge. Operationally, we will continue our margin expansion efforts to ensure that our structure efficiently serves our agents. We remain focused on maximizing efficiencies and implementing the [ Quala ] operating platform across the title operations during 2026, as well as continuing our initiatives to service the large commercial transactions we are seeing in the market.

And thank you. And with that, I'll turn it back to Craig.

Okay. Carolyn, thank you. So that concludes our prepared remarks, and we will now open up to the discussion to Q&A. And I'll either answer your question, or I'll ask Frank or Carolyn to chime in and help me out.

[Operator Instructions] Our first question will come from the line of Gregory Peters with Raymond James.

I guess starting just at the high level. I know in the past, you've talked about sort of what do you think the Specialty Insurance target combined ratios should look like over a course of a year. And I guess in the context of understanding those moving pieces, can you, kind of, provide us some perspective of how you think the budgeting is coming along, and where you think the combined ratio targets might be for 2026?

Sure, Greg. Yes. So ending the year at a combined ratio in Specialty of [ 93.2% ] feels pretty good to us. We're hopefully over time, be a bit better than that. But I think where we're at in the P&C cycle, that feels pretty good. And relative to next year, our plan is to produce something around the same level.

It depends by -- we have 20 different operating companies. Depending on the operating company, that varies. If it's longer tail lines of business, it might be a little bit higher. If it's shorter tail lines of business, it's probably lower. So all the businesses have a unique plan, and they have targets that they set relative to those plans. So I would say 2026, we're looking for a very consistent year. Obviously, there's talk of pricing pressure in the marketplace. But we're going to maintain our discipline.

As I mentioned in my opening comments, we're keenly focused on pricing discipline, underwriting discipline. Every company is focused on combined ratio over top line. And even in our incentive compensation plans, when we have soft pockets of business where pricing is too aggressive in the marketplace, we will remove any kind of growth or retention goal and make compensation based on -- strictly on combined ratio. So it's all about bottom line for us, and that's really driven by the combined ratio.

Right. And I guess the other two questions I had on the Specialty Insurance side, One is just going back to just some more background and what led to the higher loss pick? Because you said it wasn't reflected in, yet, in the paid claim data. So I'm just curious what you're seeing, and I do recognize your approach to case and loss -- case reserves and loss picks.

So -- and then the other question I had just -- so we just get a model on the table there for you is, I think, Frank mentioned a credit loss on one of the large deductible programs. Just some background on that as well.

Sure, Greg. I'll take both of those. Yes. So we start the beginning of the year with what we believe to be a conservative loss pick. And from there, as we go through each week, we study what's happening with case reserves, and also what's happening with paid losses. And we take those into consideration and look at what trend we think that, that implies. We take a close look at severity. We take a close look at frequency and come up with an overall trend.

So what we saw in commercial auto this year, for the better part of the year was trends. We said, I think, on prior calls, we were seeing trends in the low teens and that we were obtaining rate increases that we're at least commensurate with those trends, and that was the case. As we got towards the end of the year, while we did not notice any paid claim difference, we did notice that case reserves were higher. And as we communicate, we're conservative. And if we see case reserves at a higher level, we'll react. We did that, I think, a couple of years ago. Same exact thing where trends, all of a sudden, moved a bit higher than what we were seeing earlier in the year. And as such, trends now look to be rather than in the low teens, the mid-teens. And as such, the 3 percentage point increase to the accident year loss ratio. We'd rather be conservative and go with what we're seeing in case reserves, as opposed to being relaxed and relying on paid losses.

So I'd just point out, it's not something we missed. It's -- and to give everyone a little more color around that, loss trends move. They're volatile. We follow them regularly [indiscernible] daily, weekly, monthly, quarterly. And it's always a moving target. It's impossible to instantaneously know what today or tomorrow's loss trend is. No one has a crystal ball. And the best anyone can do is make a projection based on current observations. And that's exactly what we do. We make a projection based on what we're seeing, and it's usually a conservative projection. In this case, a conservative projection around what we're -- what we saw in the movement between case reserves in the beginning of the year as opposed to case reserves more toward the end of the year.

And just to underscore this a little bit more when I make the statement that it's impossible to precisely and instantaneously know what your trend is going to be, it takes time from the first notice of loss to the time that an adjuster is able to set ultimate case reserves. At the time of first notice of loss, the ultimate number of bodily injuries, the severity of the injuries, whether or not there's attorney representation. Those are all things that are not usually immediately known, and it takes time for that to play out. And that's why it's impossible to instantaneously know what your severity is until you get that kind of information and the year progresses and it comes through in your case reserves.

So hopefully, that provides a little more color around what we saw, how we reacted. And it's really 100% consistent with what we've communicated to all of our investors and analysts. When we observe higher loss trends, we immediately react by adjusting the loss ratio. And as you saw in the fourth quarter, as I mentioned in my comments, we immediately react with rate and rate increases in commercial auto accelerated in the fourth quarter and now are upwards of 16% compared to -- I think we were at 14% last quarter. So -- and we'll keep doing exactly that.

So I'll move on to your second question regarding the $17.5 million offset we had on workers' comp favorable development. And that came from -- as we said in the release, a large deductible program where the losses from prior years had developed. And in this case, there was a credit risk exposure. So we ended up with insufficient collateral, and on [ large deductible ] programs when that happens, that's something that then falls to us. And accordingly, we have to put up the reserves ourselves. So that's what happened in this quarter.

And you've been following us long enough to know that those kind of losses are somewhat unique. And certainly in our [ 45-year ] history, that's a pretty big number for us relative to past experience. And 99 out of 100 times, we have enough collateral to take care of things, even if losses do develop unfavorably in prior years. But in this one instance, there was insufficient collateral.

Well, that's excellent detail. So it's appreciated. Mindful that others might be asking questions. So I just close out. Carolyn, if you could just provide your crystal ball view on what 2026 might look for the Title business. I feel like your pick might be as good as anybody's out there. So just curious about your perspective on that.

Sure. In all of kind of the research that we do from people that report on that, it's still showing that commercial should have about a 15% to 20% improvement over this year, which was a wonderful year for commercial. But they see a single-digit increase in residential for next year, less than 10%. So somewhere -- there's -- it goes between 3% and 7% depending on who you look at. So I think it's going to be another year like this year, with some improvement, especially if commercial does improve like it did. So we're looking forward to 2026.

When you say next year, both you and Craig, I presume you mean '26.

Yes, I do.

Right. Right. Yes. We're [indiscernible] fourth quarter full year '25 mode right now.

[Operator Instructions] Our next question will come from the line of Paul Newsome with Piper Sandler.

Maybe just a follow-up on the case reserves, and I apologize if I missed this because I had a little technical issues myself during the call. The case reserve increases, were there any sort of geographic or patterns within the case reserves that stood out, or would suggest other than just pure sort of overall loss trend that might give us a hint as to what might be happening under the hood?

Yes. Paul, that's a great question. The what -- and we've looked at it in great detail. I can't say geographically, there's anything we've detected. But there are a few things we do know. And that is that the number of people making bodily injury claims relative to the number of accidents that we have is higher. And the percentage of bodily injury claims with attorney representation is higher. And the percentage of claims that end up in litigation in our -- is higher as well.

So a bit of an opinion section here. And that is our view is that litigation system abuse is accounting for these increases. And that includes the ongoing proliferation of attorney advertising where plaintiff attorneys are attempting to vilify insurance companies and you only need to turn on the television, or drive down the interstate and see the billboards. And it's amazing. The number of advertisements on television, on billboards, is just continuing to proliferate. And to us, it's clear that plaintiff attorneys have come to the conclusion that there's a return on these investments. So I think there's industry studies out there from some good industry associations that we're part of and they are coming to the same conclusion.

So those are the only observations. Again, if you have an accident, and you have a property damage claim. We track both bodily injury and property damage, third-party property damage separately. Third-party property damage frequency isn't going up. But bodily injury frequencies going up. Well, how can that be other than just more people willing to make bodily injury claims. And so, again, it comes back to the only conclusion that we can come to is that this litigation system abuse and proliferation of attorney advertising continues to rear its head, and we'll have to see where it goes. But that is what we would attribute a good portion of this, too.

Were the trends any different? Like I know you cited long-haul trucking, Were the trends any different in other portions of what you do in commercial auto? Obviously, trucking big piece, but I think you do some other stuff as well. Was it just consistent across anything [indiscernible] to do with commercial auto?

Another great question because on our other commercial auto, other than long-haul trucking, the trends are there, but they're not as pronounced as they are on long-haul trucking. I think coming back to litigation abuse, a lot of these plaintiff attorneys try to target insurance -- trucking companies and vilify insurance trucking companies and insurance companies and side. And usually, trucking -- long-haul trucking, in particular, has larger limit policies and plaintiff attorneys know that. So there's more of a target on their back, so to speak. So there is a little bit more rearing its head on long-haul trucking as opposed to other commercial auto.

So I know in the past, you've been with [indiscernible] last question [indiscernible] ask it. I know in the past, you guys have been very disciplined about hitting a loss trend with rate. And I'm going to assume that that's the plan prospectively as well. Are there other things that you're considering in terms of reacting to the loss trend change in terms of condition, or areas [indiscernible] or anything else sort of non-rate actions? Or is this going to be just a matter of hit it with rate, whatever you think is happening from a loss trend perspective?

Yes. So we are -- out of all of our 20 companies, our most sophisticated data and analytics area is within our long-haul trucking company. And we slice and dice the data and analytics in a very robust and sophisticated fashion, which helps us with targeting rate to those customers that elevate higher propensity for lots. And so part of that is risk selection as well. It helps us with risk selection and being able to not broad brush rate, but target rate to the insureds that require more rate. And then also continually refine our risk selection so that we're selecting what we think are the best risks and making it very punitive, or not providing quotes at all to those risks that we deem too high.

With respect to terms and conditions. There's not -- there's -- while in other of our businesses, terms and conditions are key -- really key to the business, the Specialty business they're in. Long-haul trucking, there's not a lot you can do with terms and condition on commercial auto. So I wouldn't say that there's a lot we're doing with terms and conditions. But we react with rate. We make sure our overall portfolio rate increase is reflective of the trends that we're observing.

And we -- when I answered Greg's question, I explained that understanding what the trend is, is not instantaneous, but we use a conservative approach. We assume trend is going to -- if it's going up, we assume it's going to continue to either be where it's at or continue to go up. And until we have clear evidence it's going down, we're not adjusting rates downward. We adjust the rates upward. And just in 1 quarter, 200 or 300 basis points, and we'll have to keep our foot on the pedal on that, assuming that we -- our goal is to stay ahead of trend, which we will continue to do.

I would also just point out that as far as what this means for 2026 are, because we do that, our expectations for 2026 are not different from where we're at now with respect to loss ratio. We assume we're going to keep up with trend. You may recall from a couple of years ago, we had similar kinds of observations back at the end of 2023. And we -- for the fourth quarter of 2023, we bumped up that accident year loss pick. And if you look at how that year has played out, you can look at the financial supplement, things after 2023 were -- remained pretty steady. And into '24 and '25 with 72% loss ratios, following a 71.5% loss ratio in '23. So we would expect the same to happen here again. We're not changing our view on how 2026 looks.

Our next question is a follow-up from the line of Gregory Peters with Raymond James.

One of the things I just wanted to touch upon [indiscernible] to close out the capital position of the company. I mean, you've been -- your record of special dividends alongside your regular dividends, pretty interesting. And I'm just curious how you view, in light of the $2.50 dividend that I guess, is paid out and -- was paid out already in January here. How you view the capital of the company at this point in time? And what are the metrics we should be watching for to determine whether there's still excess capital, et cetera?

Sure, Greg. I'll be happy to do that. So part of our regular planning cycle is to head into our February Board meetings and present our plan for 2026, which includes a complete analysis of our capital position and our projected capital position. We still think we have plenty of capital. So we think that will put us in a position to, again, recommend to the Board a regular dividend increase, somewhere in line with what we've been doing over the last couple of years.

And in the meantime, we also have $850 million still remaining on our share repurchase program, and we'll put that to work. Especially when there's opportunity, we said all along that we like having both tools in our tool chest, the share repurchase tool, as well as the special dividend and regular dividend tool. And to the extent that we think there's a buying opportunity, we've said we'll be opportunistic. And to the extent that markets react or overreact, it gives us a buying opportunity to repurchase more shares.

So we have that $850 million. We believe that if the opportunity presented itself, we could put most of that to good use throughout the year, and we would do that. And then as we get further along in the year, again, take a look at where we're at with that capital position, what we've been able to do with share repurchases. And if we -- as we did at the end of last year in December, if we think we are ending the year with more capital, again, we'll reset it with a special dividend.

This concludes our question-and-answer session. I will hand the call back to management for any closing comments.

Okay. Well, thank you. We appreciate the Q&A. We appreciate the opportunity to share our prepared remarks in addition to the earnings release and wrap up 2025 for the year. It was another very good solid year. And we think we're set up for a very good '26. We realize market conditions are in question, but we'll focus on bottom line, and profitability, and continue with our underwriting excellence initiatives, and our pricing discipline, and continue to produce growth, particularly as our new Specialty operating companies are producing more and more premium. And we feel very good about where we're heading in '26. So thank you all for your interest and participation, and we will talk to you all again next quarter. Thank you.

This concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Old Republic International Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn the call over to Joe Calabrese with MWW.

Thank you, Tina. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss third quarter 2025 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of the documents are available on Old Republic's website at www.oldrepublic.com.

Please be advised that this call may involve forward-looking statements as discussed in the press release dated October 23, 2025. Assumptions, uncertainties and risks exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these assumptions, uncertainties and risks, please refer to the forward-looking statement discussion in the press release and the company's other recent SEC filings and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings.

We may also include references to net income, excluding net investment gains or net operating income, a non-GAAP financial measure, in our remarks or in responses to questions. GAAP reconciliations are included in the press release.

Presenting on today's conference call will be Craig Smiddy, President and CEO; Frank Sodaro, Chief Financial Officer; and Carolyn Monroe, President and CEO of Old Republic's National Title Insurance Group. Management will make some opening remarks, and then we'll open the line for your questions.

At this time, I'd like to turn the call over to Craig. Please go ahead, sir.

Okay. Thank you, Joe. Good afternoon, everyone, and welcome again to Old Republic's third quarter 2025 earnings call. In addition to our earnings release, we also issued a separate news release this morning regarding our agreement to purchase Everett Cash Mutual through a sponsored demutualization. We think this is reflective of our commitment to continue to pursue profitable growth of our specialty insurance business.

ECM, as it's referred, is a leading insurer of farm and agricultural operations nationwide, writing $237 million of direct premium in 2024. We also added a new slide on ECM to the appendix of our investor presentation on our website. So there's more there for you to see if you're so interested.

Strategically, ECM fits very nicely into our specialty insurance portfolio given our close cultural alignment and their narrow and deep focus on farm and ag specialty. ECM provides for further product diversification within our existing specialty insurance business. And we will not compete with any of ECM's current offerings or vice versa.

So once the transaction closes, we expect ECM to be very well positioned from a capital and product perspective to pursue profitable growth geographically and through new product offerings. So we're very happy to have the ECM folks join the Old Republic family.

So now turning to the earnings release. Our story of solid growth and profitability continued through the third quarter as we produced $248.2 million of consolidated pretax operating income. That's up from $229.2 million in the third quarter of '24. Our consolidated combined ratio was 95.3%, and that compares to 95% in the third quarter of last year.

On our balance sheet, it remains strong, while we continue to invest in new specialty operating companies, make ongoing technology investments and also invest in talent across the organization.

Our annualized operating return on beginning equity improved to an annualized rate of 14.4%, and that compares to 11.9% in the third quarter last year, which we think reflects our strong operating earnings and thoughtful management of capital.

In specialty insurance, we grew net premiums earned by 8.1% compared to the third quarter of '24 when we produced $207 million of pretax operating income, up from $197.3 million in the third quarter last year. The specialty insurance combined ratio was at 94.8% in the quarter, compared to 94% in the third quarter last year.

Despite the continuation of a slow real estate market, title insurance grew premium and fees by 8.3% compared to the third quarter last year, and produced $45.7 million of pretax operating income, and that's up from $40.2 million in the third quarter last year. The title insurance combined ratio was -- or excuse me, 96.4% in the quarter, and that compares to 96.7% in the third quarter last year.

Our conservative reserving practices continue to produce favorable prior year loss reserve development in both specialty insurance and title insurance, and Frank will provide more details around that topic. So with that, I'll turn the discussion over to Frank. And then Frank will turn things back to me to discuss specialty insurance, followed by Carolyn, who will discuss title insurance. And then as the operator says, we will open it up for Q&A.

So Frank?

Thank you, Craig, and good afternoon, everyone. This morning, we reported net operating income of $197 million for the quarter, compared to $183 million last year. On a per share basis, comparable quarter-over-quarter results were $0.78, compared to $0.71, a 10% increase.

Net investment income increased 6.7%, primarily as a result of higher yields on the bond portfolio. Our average reinvestment rate on corporate bonds acquired during the quarter was 4.7%, compared to the average yield rolling off of about 4.1%. The total bond portfolio book yield stands at 4.7%, compared to 4.5% at the end of last year.

Turning now to loss reserves. Both Specialty Insurance and Title Insurance recognized favorable development in the quarter, leading to a benefit in the consolidated loss ratio of 2.5 percentage points, compared to 1.3 points of favorable development last year. Within Specialty Insurance, workers' comp continued to have significant favorable development and accounted for the majority of the group's total favorable development. Commercial auto, general liability and property all had favorable development in the quarter.

As we have mentioned in the past, general liability is a relatively small but growing line that does have some quarter-to-quarter volatility. This quarter, GL had favorable development and the year-to-date impact was negligible on the Specialty Insurance loss ratio.

We ended the quarter with book value per share of $26.19, which, inclusive of the regular dividend, equated to an increase of 18.5% year-to-date. That resulted primarily from our strong operating earnings and higher investment valuations.

In the quarter, we paid $71 million in regular cash dividends and repurchased $44 million worth of our shares. We did not repurchase additional shares since the end of the quarter, leaving us with just over $910 million remaining on our current repurchase program.

The recently launched operating companies and the ECM acquisition do not materially hinder our ability to return capital. So as usual, we will be discussing with our Board of Directors the most efficient way to return capital by the end of the year.

I'll now turn the call back over to Craig for a discussion of Specialty Insurance.

Okay. Frank, thanks for that summary. Specialty Insurance net written premiums were up 6.9% in the third quarter, with strong rate increases on commercial auto and general liability, that I'll talk about momentarily. We had solid renewal retentions, strong new business writings and an increasing amount of premium in our new specialty operating companies.

As mentioned in my opening remarks, in the third quarter, Specialty Insurance pretax operating income was $207.7 million, and the combined ratio was 94.8%. The loss ratio for the third quarter was 63.5%. That included 3.4 percentage points of favorable prior year loss reserve development, compared to 65.2% in the third quarter last year, which included 1.7 points of favorable development.

The expense ratio was 31.3% in the third quarter compared to 28.8% last year, primarily reflecting higher personnel expenses, including those within our newest specialty operating companies not yet producing premium, and ongoing investments in technology. For note, the year-to-date expense ratio and loss ratio tend to be better indications of run rates, and they also reflect changes in our mix of business toward lower loss ratios and higher commission ratios.

Now to give you some details around our 2 largest lines of business: commercial auto and workers' compensation. Commercial auto, net premiums written grew 7% in the third quarter, while the loss ratio came in at 68.3% compared to 67.1% last year. Rate increases remained at the 14% level, which is the same we saw in the second quarter, and that's commensurate with the loss severity trend we're observing.

Switching to workers' compensation. Net premiums written grew 6.7% in the third quarter, while the loss ratio came in at 63.8%, compared to 58.8% last year. Rates continued to remain relatively flat. And here too, that's consistent with what we observed in the second quarter. Loss frequency trend continues to decline, more than offsetting the increase in loss severity trend. So given the positive wage trend within payroll, and again, that's what we apply our rates to, a declining loss frequency trend and a relatively stable loss severity trend, we think our rate levels continue to remain adequate.

So we expect solid growth and profitability in Specialty Insurance to continue, reflecting the success of our specialty strategy and our growing contributions from our new specialty operating companies. Our operational excellence initiatives continue to contribute to this profitable growth by leveraging Old Republic's collective knowledge and expertise. And we also here too included a new slide on these initiatives in the appendix of our investor presentation on our website.

So that concludes my remarks on Specialty Insurance, and I'll now turn the discussion over to you, Carolyn, to report on Title Insurance.

Thank you, Craig, and good afternoon, everyone. Title reported premium and fee revenue for the quarter of $767 million. This represents an increase of 8% from third quarter of last year. The third quarter market story is a continuation of what we reported last quarter. We still see strong activity in the commercial sector, a modest uptick in refinance activity and a softness in the residential purchase market driven by persistent price and affordability challenges. Overall, we are pleased with our revenue improvement during the year.

Premiums from our direct title operations were up 8% from third quarter of last year. Agency produced premiums were up 11% and made up nearly 80% of our revenue during the quarter, up from 78% during third quarter of 2024. Commercial premiums increased this quarter and were 26% of our earned premiums, compared to 20% in the third quarter of last year.

Investment income was also up this quarter, by nearly 11%, compared to third quarter 2024, primarily reflecting higher investment yields earned. Our overall loss ratio decreased to 2.7% this quarter, compared to 2.8% in the third quarter of 2024. The slight improvement relates to continued favorable development in prior policy years.

Agency premiums accounted for a larger share of our revenue this quarter, raising agent commissions and increasing our expense ratio by 1.9%. The remainder of our expenses decreased by 2.1% relative to premiums and fees. These changes led to a combined ratio of 96.4% for this quarter, an improvement over both last quarter and the 96.7% reported in the third quarter of 2024.

Pretax operating income this quarter was $46 million, compared to $40 million in third quarter of last year. During the quarter, we continued progressing with the advancement of digital transaction tools and solutions for our direct operations and title agents through our strategic partnerships. We remain focused on the importance of providing our agents with the innovative technological solutions required to maintain a competitive edge.

Thank you. And with that, I will turn it back to Craig.

Okay. Thank you, Carolyn. Well, that concludes our prepared remarks. So we'll now open up the discussion to Q&A where I'll try to answer your questions or I'll ask Frank or Carolyn for some help.

[Operator Instructions] And our first question comes from the line of Gregory Peters with Raymond James.

For my first question, I want to go back to Frank's comments on capital. And I guess what I'm looking for is just how you are measuring excess capital, because it seems like there's a shift. Or maybe put it a different way, maybe your -- there's been a strategic decision not to hold as much excess capital. But either way, I'm just looking for how you're measuring capital right now. Is it reserves -- based on reserves, or what the ratios you're looking at and how you're thinking about excess capital in the context of what Frank was saying in the fourth quarter?

Yes, Greg, I'll start, and Frank has anything to add, he can add it. Last year, when we declared the $2 special dividend, we made note that we had this nice problem of continuing to have operating income retained earnings that were building faster than we could return capital to shareholders either through share repurchases or dividends. And so we issued a special dividend.

When we contemplate that and discuss that with our Board, we look at several different enterprise risk management measures. And one of those is certainly the amount of capital we hold relative to the reserves. But there's been no major shift at all. It's really just a matter of, again, having a nice problem where we continue to just build capital faster than we could deploy it.

So as we sit here this year, the same kind of thing has happened. We have built up capital again, and we have done so faster than we're able to return it through share repurchases or ordinary dividends. So as Frank indicated, it's a matter that, as we always do, we'll take up with our Board and suggest the best ways to return that to shareholders in a way that is most productive for the shareholders.

So that's, again, no shift. We continue to look at multiple different metrics when we look at capital and we manage it thoughtfully, as I indicated in my comments, and do a significant amount of analysis and make recommendations accordingly to our Board.

Great. And I was looking over your slide on Everett, and just curious if you could tell us a little bit more about this entity. You highlighted that there's not a lot of crossover in terms of product. So I'm just curious how you're thinking about this business and how it's going to sit inside over public. And when -- more importantly, I know you've got these start-up operating companies, the 5 that you've outlined, does this become #6 as you branch off into some other types of businesses. So just some more color there would be helpful.

Sure, sure. So I'll start with the latter part of your question, and that is we definitely look at it as a new operating company within our existing portfolio of operating companies. I think that would take us up to 18 companies within our Specialty Insurance, and then, of course, our Title Insurance being our 19th.

So one of the things that was very, I think, attractive to ECM was that decentralized model and the degree of independence and accountability that we give to each of those operating companies. And as I mentioned as well, just a strong cultural alignment of integrity and transparency and the other components of our cultural tenets that we share.

So as far as the business itself, we, again, are thinking that it is very complementary, doesn't compete with our existing segments. It's a specialty segment in the marketplace. And that is the sole focus of Everett, which is exactly what our strategy is, and that is for our each of those 18 different operating companies to be an inch wide, mile deep in their specialty focus very narrowly on what they do and do it better than anybody else. And ECM checks every one of those boxes.

So I guess getting into more of the technicals, as I mentioned, ECM focuses on farm and ag business. And in that portfolio, farm owners and commercial, multiperil make up 70% of their coverages with inland marine and commercial auto each making up about 9% of their coverages. And another important attractive note is that their business skews more toward short-tail lines of coverage, which a lot of the new companies that we've added lately to diversify our portfolio have been, which is a short tail kind of line. So you have a much faster understanding of how the business is performing.

And again, we intend to give ECM the capital necessary to continue to drive expansion of their business. We expect they'll do that through geographic expansion. They started some geographic expansion by making an acquisition in late 2022 when they made an acquisition that allowed them to expand westward. And I think another attribute that is shared is they compete on the basis of expertise, relationships, ease of doing business around their specialty niche just like all of our specialties. So again, their profile is very consistent with the profile of our existing specialty companies. And as such, we just think it's a perfect fit.

Excellent. And just pivot to the Title business, just my final question. Hope springs eternal that things -- market will turn on the residential side. In the interim, I know you addressed this last conference call, in Texas, there was some challenges on some rate rollbacks. I'm wondering if you're seeing any other regulatory pressures build up in any other states? Or is it just normal operating status everywhere else?

Yes. I think it's been fairly consistent, nothing significant has emerged. But Carolyn, you're much closer to the action than I am. So I'll turn it to you to maybe add any color you might have.

Greg, no, it's been fairly quiet on the regulatory front, nothing out of the ordinary. Still waiting on the Texas -- it was appealed. There was supposed to be a hearing in December, but really no word on that yet. But that's the only thing that's out there brewing right now.

And our next question comes from the line of Paul Newsome with Piper Sandler.

I want to beat on the ECM dead horse a little bit more. The -- and I don't know if you will actually get more precise numbers, but I'd like to know how this fits in with -- a little bit better with how it fits into the capital decisions that you're going to be making in the near future. I mean I would imagine ECM is going to cost at least the statutory capital for you, folks. And then it sounds like -- again, correct me if I'm wrong in these assumptions, that there's an intention to put more capital into ECM. And then, I guess, on top of that, you have whatever is left in your view of excess capital.

And so I guess the questions are, are those the right pieces I should be looking at? And then can we talk about sort of like potential timing for those things? It sounds like ECM is going to close sometime in '26. I don't know if that means you hold on to capital a little bit longer this time around and some of the more speedy things you've done in the past at year-end? It's about 5 questions in there, I apologize.

Yes. I think we follow, though. Well, as we indicated in the release, we expect this to be accretive to book value per share. So you can infer from there that it is not -- will not be at least the amount of their statutory capital. And that is because of the structure of a sponsored demutualization.

So from a high-level standpoint, the sponsored demutualization is not going to affect our view of capital as we get to that analysis with our Board and look at things -- how things look at the end of the year. There's really no consideration in that analysis of capital needs in order to follow through on the sponsored demutualization. Through that sponsored demutualization, ECM will end up with additional capital and that is what will enable them to pursue growth opportunities. As you know, Mutual has a limited amount of ability to raise capital. And under our umbrella here at Old Republic, we will have that capital if they need it.

But just through the sponsored demutualization itself, they will end up with more capital to pursue those goals. And again, on top of that, we don't plan on contributing additional capital beyond that. So long story short, it is -- really doesn't move the needle at all when it comes to how we're looking at our capital position and the recommendations we'll be making with regard to returning capital to shareholders going forward.

Okay. That's great. Now a follow-up question on a different horse, beat-up horse. Yesterday night last night, we had some not-so-happy news [ as selective ] about commercial audio insurance [ brewing ] an additional problem for them. And I don't know if you can respond to that directly, but obviously, you are a big commercial auto writer. It's a different business, I recognize that. But maybe some thoughts on what you think is going on in the commercial auto business and why you may or not be ahead of the game there.

Sure. I'd be happy to talk about that again. We're quite proud of where we stand relative to the industry. As I think I've mentioned in prior quarters, we continue to put up favorable loss reserve development on commercial auto, while many of our peers over the course of the last few years have been putting up unfavorable development.

And there's a lot of components that account for why we're in such a strong position. Again, I would point to, just first and foremost, the starting point of identifying the severity trend and then getting the commensurate rate that you need. And now we're going back 6 or 7 years where we identified it a lot earlier than a lot of our peers and responded with rate increases to offset those trends we were seeing. I mentioned in my opening comments, we -- it's still a problem for the industry in that we think the trend is running somewhere in the low teens and we're getting rate increases on commercial auto of 14%.

So that's been our MO for the last 6 or 7 years. We spot the trend. We get rate increase commensurate with that trend, once you have a good starting point. And I think a lot of our peers didn't have a good starting point because they didn't recognize it as quickly, maybe weren't getting the rate increases early enough and -- or not getting as strong as rate increases as necessary to keep up with that trend.

And then there's other things just about the way we think about things and do business that are important. One of the things, Great West is our trucking business, and they do one thing and one thing only: long-haul trucking. They have a team of statisticians, analysts that are relying on data and analytics to adjust their rates in real-time fashion. They don't rely on ISO. A lot of our competitors rely on ISO. And if you're going to write commercial auto, long-haul trucking, you're relying on ISO, you're already probably behind the game.

So we're real time. We have our own team. We have our own proprietary rate filings in every state. Those rate filings we have, we have 42 tiers built within our proprietary rate filings, so that we can segment our business and analyze it and apply the appropriate rate, the appropriate risk, and do that, again, in a fashion that is very responsive to what we're seeing on trend.

On the claims side, again, inch wide, mile deep. All we do is long-haul trucking claims. We have -- our folks are -- we have a catastrophic team, 5 airplanes that immediately get out of catastrophic events, immediately try to get our arms around the catastrophic losses that can certainly cause significant severity in the results. Our team in claims, they have relationships with all the EPA folks within all the states. So if you have a spill on -- a cargo spill or something like that, we know immediately how to handle it, immediately who to talk to mitigate the amount of damage from those kinds of instances. And I could go on about just, again, how specialized we are in that space.

And then lastly, I would just say it's about reserving. It starts with case reserving. Great West is terrific at getting case reserves set to ultimate as quickly as possible. As a matter of fact, when they get those case reserves set, unlike many in the industry, our case reserves actually run off a little bit redundant, which is unheard of. So the only IBNR we really need is for true IBNR where we actually don't know of an incident yet. But when we know of an incident, our case reserves are set to ultimate and set there very quickly. We don't stair-step, as it's so-called in the industry, like many like many do.

And then when it comes to our IBNR reserving, we've talked about that [ on all ] of our lines, but we have a very conservative approach on our IBNR reserves whereby [indiscernible] loss pick at the beginning of the year. Auto liability, we're holding that loss pick at what we set it at, even if we see results come in that look better than expected. If we see results that come in and we think it's a little bit hotter than we expected, we will raise that initial loss pick. But we will not lower that initial loss pick until we get at least 3, 4 years out on commercial auto, 5 years out on workers' compensation.

So those long-tail lines, we are very conservative in how we manage IBNR, in addition to on all of our lines of business, our new Chief Claims Officer, new being he's been here a couple of years, came in at exactly the right time to help us address the legal system abuse issue, the severity issue, plaintiff attorney tactics, and he's helped in that regard. But one of his main charges is to ensure all of our companies are getting case reserves set to ultimate as quickly as possible on every one of our lines of business so that we can know what we have and ultimately respond and produce the kind of results we have, and have -- achieve our goal of having a couple of points of favorable development on average over time on every line of business.

[Operator Instructions] With no further questions in queue, I will now turn the call back over to management for closing remarks.

Okay. Well, we appreciate the interest. We appreciate the questions. And again, we look forward to welcoming the ECM stakeholders to the Old Republic family. And we also are looking forward to producing the strong profitable growth for our shareholders and all other stakeholders as well. And we look forward to reporting our year-end results next time we talk to you. So thank you very much.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.

Good afternoon, and welcome to Old Republic International's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Joe Calabrese at MWW. Thank you. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us for the Old Republic conference call to discuss second quarter 2025 results. This morning, we distributed a copy of the press release and posted a separate financial supplement. Both of these documents are available on Old Republic's website at www.oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release dated July 24, 2025.

Assumptions, uncertainties and risks exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these assumptions, uncertainties and risks, please refer to the forward-looking statements discussed in the press release and the company's other SEC filings and the risk factors discussed in the company's most recent Form 10-K and other recent SEC filings.

We may also include references to net income, excluding net investment gains or net operating income, a non-GAAP financial measure in our remarks or in responses to questions. GAAP reconciliations are included in the press release.

Presenting on today's conference call will be Craig Smiddy, President and CEO; Frank Sodaro, Chief Financial Officer; and Carolyn Monroe, President and CEO of Old Republic's National Title Insurance Group. Management will make some opening remarks, and then we'll open the line for your questions. At this time, I'd like to turn the call over to Craig. Please go ahead, sir.

All right. Joe, thank you very much, and good afternoon, everyone. Thank you for joining our call, and welcome again to our second quarter 2025 earnings discussion.

Well, our story of strong growth and strong profitability continued through the second quarter of this year. During the second quarter, we produced $267.5 million of consolidated pretax operating income, up from $253.8 million in the second quarter of '24. Our consolidated combined ratio was 93.6 compared to 93.5 in the second quarter of last year. In the specialty insurance, we grew net premiums earned by 14.6% in the second quarter and produced $253.7 million of pretax operating income. That was up from $202.5 million in the second quarter last year.

The specialty insurance combined ratio was 90.7 in the quarter, and that compares to 92.4 in the second quarter of last year. In Title, despite the continuation of higher mortgage interest rates and a slow real estate market, the title Insurance folks grew premiums and fees earned by 5.2% compared to the second quarter last year, and they produced $24.2 million of pretax operating income down from $46 million in the second quarter last year. And Title combined ratio was 99 in the quarter compared to 95.4 in the second quarter of last year. And of course, Carolyn will give us a little more insight into those figures. Our conservative reserving practices continue to produce favorable prior year loss reserve development in both Specialty Insurance and Title Insurance. Our balance sheet remains strong, and we continue to invest in our new specialty underwriting subsidiaries as well as in technology and in talent.

So with that as opening remarks, I'll now turn the discussion over to Frank. And Frank will then turn things back to me to cover Specialty Insurance, and then I'll turn things over to Carolyn to cover Title Insurance, and then we'll open it up to the Q&A part. So with that, I hand it to you, Frank.

Thank you, Craig, and good afternoon, everyone.

This morning, we reported net operating income of $209 million for the quarter compared to $202 million last year. On a per share basis, comparable year-over-year results were $0.83 compared to a $0.76, a 9% increase. Net investment income increased 2.4% as a result of higher yields on the bond portfolio partially offset by lower invested asset base from returning excess capital and then included the $500 million paid as a special dividend during the first quarter of this year.

Our average reinvestment rate on corporate bonds during the quarter was 5% compared to the average yield rolling off of about 4%. The total bond portfolio book yield now stands at 4.7% compared to 4.5% at the end of last year.

Turning now to loss reserves. Both Specialty Insurance and Title Insurance recognized favorable development in the quarter leading to a benefit in the consolidated loss ratio of 2.1 percentage points compared to 2.2 points last year. Within Specialty Insurance, Workers' comp continued to have strong favorable development and accounted for the majority of the group's total favorable development. Commercial auto and property also had favorable development, while general liability had unfavorable development.

However, the year-to-date impact was less than [ 0.005% ] on the Specialty Insurance loss ratio. We ended the quarter with book value per share of $25.14, which inclusive of the regular dividend equated to an increase of just over 12.6% resulting primarily from our strong operating earnings and higher investment valuations. In the quarter, we paid $71 million in regular cash dividends. We did not repurchase any shares during the quarter. And our repurchases since the end of the quarter were not material. So that left us with just over $200 million remaining in our current repurchase program.

I'll now turn the call back over to Craig for a discussion of Specialty Insurance.

All right. Thanks, Frank.

So Specialty Insurance net written premiums were up 9% in the second quarter and that came from strong renewal retention ratios, rate increases on most lines of coverage and solid new business writings and an increasing level of premium production in our new specialty underwriting subsidiaries. We continue to expand our E&S presence with E&S direct written premiums up 12% so far this year. As mentioned in my opening remarks, in the second quarter, Specialty Insurance pretax operating income was $254 million, and the combined ratio was 90.7. The loss ratio for the second quarter was at 62.5, and that included 2.9 percentage points of favorable prior year loss reserve development compared to 64.3 in the second quarter last year that included 2.5 points of favorable development.

The expense ratio was in line with expectations coming in at 28.2 in the second quarter compared to 28.1 in the second quarter last year. So given these top line and bottom line results, we continue on our journey of profitable growth within Specialty Insurance.

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

We saw rates stay relatively flat this quarter, while loss frequency trend continues to decline and loss severity trend remained stable. So here, given the higher wage trend within payroll, which is what we apply our rates do. And given the declining loss frequency trend and stable loss severity trend, we think our rate levels for workers' compensation remain adequate.

So going forward, we expect solid growth and profitability to continue in Specialty Insurance throughout the rest of this year, reflecting the success of our specialty strategy and our operational excellence initiatives.

We also expect to continue to see growing contributions from our newer specialty underwriting subsidiaries. So that's a high-level summary for the Specialty Insurance Group, and I'll now turn the discussion over to Carolyn who will report on our Title Insurance Group. Carolyn?

Thank you, Craig. Title Insurance reported premium and fee revenue for the quarter of $698 million. This represents an increase of 5% from the second quarter of last year. Although we are pleased with continued revenue improvement, we've seen very little change in the real estate and mortgage market conditions.

Premium from our direct title operations were up 3% from second quarter of 2024, our agency produced premiums were up 7% and made up 77% of our revenue during the quarter, up from 76% during the second quarter of last year. Commercial premiums increased this quarter and were 23% of our earned premiums compared to 21% in second quarter of last year.

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

Cost from the settlement of a legal matter was the primary driver of this increase. Our combined ratio increased to 99% this quarter compared to 95.4% in the second quarter of last year.

During the quarter, we continued progressing with the advancement of digital transaction tools and solutions for our directs and our title agents through our strategic partnerships. We remain focused on the importance of providing our agents and employees with the innovative technological solutions required to maintain a competitive edge. These include our internal systems, such as our remittance, policy issuance and rate engines to work seamlessly with all the closing and production platforms. And I'll now turn it back to Craig.

Okay. Thanks, Carolyn.

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

[Operator Instructions] Our first question comes from Gregory Peters from Raymond James.

In your comments, Craig, you talked about retention across your Specialty Property Casualty business. Can you give us a little more detail about how retention is moving across different lines of business.

Sure, Greg. I'd be happy to. So we do look at our renewal retention metrics by line of business and by each one of our 17 different subsidiary companies. And I can tell you that regardless of the line of business or the subsidiary, we are experiencing renewal retentions north of 85%, pretty much across the board.

And we think that is attributable to our value proposition, whereby we're not selling price. We're selling service. We're selling long-term commitment to these market segments, selling our specialty expertise in underwriting, customer service, risk control, claims handling. And so our long and short of it is we think we have sticky renewal retention ratios given our -- again, our value proposition and the kind of clients and distribution partners we work with that are focused on the long term and not those distribution partners that as we -- the so-called spreadsheeting of price and going with low price, that's not the type of customer that we go after. And therefore, as I say, across all lines of business, across all subsidiaries, very strong renewal retention ratios.

Yes. The reason for the question is there's a lot of commentary on the other calls that have happened so far about competition pockets in certain areas. One of the themes that has emerged in the first half of this year was increasing competition in the larger account business. And it's more property than probably where you play. But maybe you could segue and just talk a little bit about how your business at Old Republic Risk management is going because I know that targets the larger account -- larger corporate market.

Yes. Thanks for that question, Greg. And I agree with your comments. I think one of the things that does differentiate us even on property for us, we had a slight uptick in our overall property rate increase this quarter because the property we're writing is not the large account, catastrophic exposed types of properties. We're writing property that is often packaged along with the other lines of business. And yes, some of our property has catastrophic exposure and we buy catastrophic reinsurance to protect us on that.

But we're not a big writer of property cat, where I think a lot of our peers are -- have pretty decent sized portfolios. So we don't have that dynamic that others are experiencing. And overall, I think our -- the competition that we're seeing elsewhere is nothing that I would say is a dramatic change from what we've seen earlier, again, back to our value proposition and the kind of clients that we're seeking.

An example where perhaps we have seen competition and we pulled back a little bit, as I've talked about the last few quarters, a public company D&O in our subsidiary that does write a fair amount of that business. We've been pulling back and rate decreases on public D&O have looks like they're starting to flatten out, still a little negative, but we've been encouraging our underwriters there to maintain rate.

And if that means top line is down like it was last year on public D&O, that's perfectly fine. So we're not immune to the competition, but I think there are some differences in our business model as well as the lines of business that we're in. And in risk management, just had a 40-year risk management client into our corporate headquarters here a couple of days ago and had a nice conversation with them. And on that business, as you know, Greg, we're -- it's all about service, and that's why that business is so sticky for us. And that's why we have 40-year relationships with a lot of the big clients. They retain a lot of their risk themselves. So they're not looking to us for risk transfer. They're looking to us for service. And we have large deductibles or they have captives that we see most of the premium back to. And again, there, too, that requires a relationship and long-term focus. There's a lot of collateral at stake there. And so when we collateralize, we have those obligations collateralized by the client.

Again, it has to be a relationship, and we have very strong long-term relationships in our large account risk management business for sure and we continue to add new clients based on a lot of -- there's a lot of discussion, as you know, from attending RIMs or other events among the risk managers of large companies, and we have a top-tier reputation.

Yes. Thanks for that additional information. I guess I'll just ask one other question, I'll pivot to the Title business. One of the things that's popped up in the second quarter was the issue around what's happening with Title Insurance rates in Texas. And there's a rate decrease that's being implemented. And just curious about how -- what your views on that are? Do you anticipate that that's going to spread to other states? Or how does that impact your operations? And just give us a broader sense of how you see the market reacting to that.

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

Yes. Also, Greg, if I'm not mistaken, right now, that rate decrease has not gone into effect because it's been challenged. And the last I checked, the challenge was held up in the court. And I think they're trying to come to maybe a more reasonable settlement than what was initially proposed. So that has not taken effect yet. But when they -- generally in the promulgated states, like Texas, New Mexico and Florida they look at prior year history and kind of determine if it's an adequate rate. And we have a lot of input on determining that as well, our state associations do. So I would think whatever we come up with will be an adequate way to still service the industry.

[Operator Instructions]

We'll go next to Paul Newsome from Piper Sandler.

I wanted to maybe to revisit to capital management. There's no stock repurchase in the last quarter. It sounds like to date, why not? And how do you think about your own capital position at the moment?

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

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

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

Second question, maybe a little bit more commentary on the investment outlook, obviously, a combination of cash flow and new money yields. Where do you think the longer-term trend here, we see a trend is for investment?

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

No. I would just say the biggest component now is as we've returned so much capital, our base is so much lower. From a yield perspective, that's right. It's tightening up. I would expect there to be improvements all things being equal, but no longer are the -- would I expect that 10% to 15% higher than we had, somewhere along the mid-single digits is probably what I would say all things being equal.

The next question will come from Evan Tindell of Bireme Capital.

My question is on the Specialty returning segment. I mean you guys have pretty consistently now been posting combined ratios like around 90, 91. And obviously, you guys guide to 90 to 95 over the full cycle. And I'm just wondering, has anything given how consistently you kind of outperformed or almost outperformed that range. Can we talk about like has anything fundamentally changed in terms of the mix of your business or how well you guys are executing that might allow you to kind of tighten or lower that range in terms of guidance on the combined ratio for the full cycle? Or do you guys still expect that to go back up to 95 at some point?

Right. Well, let me first say a comment that I made earlier about the complexion of our portfolio and the fact that we're not writing large catastrophic property business per se vis-a-vis our peers. Again, we have some some of that exposure. But when you write a large amount of catastrophic property, you can post some pretty decent combined ratios in good quarters and then you post some fairly awful combined ratios in quarters where there is a catastrophic event. So I think our combined ratio, given our casualty-focused business, is going to be in that range of 90 to 95. We have written a little bit more property and short-tail business, as you can tell in the supplement, you can see the growth rate in property has been a little bit stronger as we improve our footprint with our Inland Marine new specialty subsidiary, our new E&S specialty subsidiary.

They're able to write property in conjunction with other coverages and so we've grown it, but it's still not a huge area for us. So given our predominantly casualty-focused business, given our conservative loss reserving approaches, that 90 to 95 is still a good target and one that if you were able to parse out the property catastrophic portions of our competitors' combined ratio and strip out the other drivers of lower combined ratio lines of business, I think that's a pretty respectable target and difficult to achieve a much lower target on the lines we write, particularly given the proportions of our lines of business.

Okay. Great. One other question. Obviously, there's been -- AI is the talk of the town in various industries. And I'm just curious how you guys are playing with or implementing AI at this point? And if you think it can maybe make the underwriting process more efficient or help you guys cut costs or otherwise impact your business over the next 3 to 5 years?

Sure. I'd be happy to talk about that. So we are very much involved as an executive team here and with our subsidiary companies at exploring all of the AI tools that are available and ones that we might want to consider building ourselves. We just announced that we hired an AI leader at the corporate holding company level that can help lead. Our -- Steve Cross, he is leading our AI efforts. And it's hard to talk about AI without talking about data analytics because you really need the data analytics to go hand in hand with the AI to put the AI to work for you. And when we talk -- as I commented in our -- in my opening comments, we're making investments in technology we're making a concerted effort to retire our legacy IT debt. That's the first step. You've got to have in order to have data analytics and then in order to in turn from there, leverage what's available in AI, you've got to have modern technology in place. So we are investing in technology. We're retiring our legacy technology debt.

We're investing in data analytics here too. A couple of years ago, at the corporate level, we hired a data and analytics expert and that expert works with our John Gianola, works with our subsidiary companies on data analytics, and we've built out that team so that we have those -- that data and analytics available. And then Steve Cross and his team can sit on top of that what's available from the AI perspective. And we think of it as an executive team in 2 ways, either -- for the most part, AI will help you make better decisions or it will help you be more efficient.

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

And actually, maybe one more if there's time. On the Title Insurance business, do you guys think -- do you think that you need to see mortgage rates fall before you start to see combined ratios getting back into the 96, 95 or below range? Or do you think you can improve margins kind of in the current kind of housing environment?

I'll kick it off, Carolyn, and then let you add what you think. We are not satisfied with a combined ratio in Title above 95. We realize that in a tight market like we're in now with high interest rates, a very slow real estate market, that we're going to be at the top end of that range. And Carolyn and I have had this many discussions, and we're working very hard to bring our combined ratio down, assuming the same environment that exists today, we should be performing at a 95 combined ratio. So there are things that we're doing to look at where we're spending money. And I think an example of that is our decision to discontinue our focus on providing a closing platform because there's other partners and vendors that can provide very good closing platforms that our technology works well with.

We don't need to be the ones providing the closing platform. So that's an example of we're looking to make sure we're being as efficient as possible. We're -- our hope for this year was that we would get below that 95 mark. Carolyn still has -- and her team still have aspirations to bring that down. We had the litigation expense we talked about earlier that drove up our combined ratio a couple of points this quarter. But last year, we finished at 97. This year, it could be in that range, but our aspiration is to get it below 95. Carolyn, is there anything you would add to that?

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

And we will take a follow-up from Gregory Peters from Raymond James.

Real quick, if we go to the supplement on Page 2, I wanted to just give us what's going on inside the small line home and auto warranty. That seems to be growing quite nicely. And then the other question I have is just on the new business initiatives. Cyber, I think, is one of those initiatives and not hearing great things about the pricing conditions in that market. So maybe you could talk about those 2 areas.

Sure, Greg. I'd be happy to talk about both of those. So on home and auto warranty, the majority of the growth that you see there is really all the growth that you see there is auto warranty. We have entered into several new relationships with key partners and we expect to continue to have the auto warranty business grow. The home warranty business is not is not growing. It's very dependent on the real estate cycle, those warranties that we write are typically sold in conjunction with a property purchase, a new home purchase. So the real estate market interest rates have not helped our home warranty subsidiary growth. But that will change just like entitled, we know things will turn at some point. But it's -- that's why we're diversified. And even in home and auto warranty, that's why, okay, let's -- the real estate market is tough right now, let's focus on building some new relationships that can help us grow our auto warranty business. So that's what's going on there.

On the cyber front, one of our new subsidiaries is cyber indeed. And I've met with that team one of the things I said to them is, given that you're a start-up, the way that we handle start-ups is there's no incentive to put premiums on the books. In the short term, we -- even variable compensation, we will -- on a new start-up, we'll just say, listen, that's going to be fixed for 3 years because we know it's going to take time to grow. We don't want you to grow too fast. We don't want you to grow into a market that's too competitive. We want to give you time. We focus that where our definition of success is 10 years out. And when we look back, how does it look? Not the first 3 years. So in cyber, everything we hear from that team is that rates have come down over the last couple of years, but there is, I think, clear consensus indication that rates are at least flattening out.

And I read this morning from others that there's indications of greater pricing discipline, greater underwriting discipline in the cyber arena. So the discussion we've had with our cyber team is listen, focus on building out your team. We know that you're going to be in expense load for the next couple -- 2 to 3 years. Take your time, build it right, wait for the market to turn and for their -- for you to be certain that there's price adequacy in the marketplace. And then -- so actually, the timing feels pretty good to us because if they wanted to write a lot of cyber today, they could -- they're building it out. We don't expect to write premiums until probably beginning of next year. And even then, we'll go slow, but we'll be ready. And there's no incentive for them to put any premiums on the books until the timing is right. And in the meantime, they're just focused on building out that operation and they have their sleeves rolled up and working day and night to get it built so that when the market is right, we'll be there for it.

[Operator Instructions]

At this time, there appear to be no further questions. I'd like to hand the call back to management for any additional or closing remarks.

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

And everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.