Old Republic International Corporation ORI shares are trading at a discount to the Zacks Multi-line Insurance industry. Its forward price-to-book value of 1.43X is lower than the industry average of 2.31X, the Finance sector’s 3.72X and the Zacks S&P 500 composite’s 8.83X. It has a Value Score of A.
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The insurer has a market capitalization of $9.23 billion. The average volume of shares traded in the last three months was 1.12 million.
The stock remains attractively valued compared with CNO Financial Group, Inc. CNO, EverQuote, Inc. EVER and Assurant, Inc. AIZ.
Old Republic shares have gained 23.9% in the year-to-date period, outperforming the industry and the Finance sector’s growth of 19.1% and 21.6%, respectively. The Zacks S&P 500 index has returned 27.3% in the said time frame.
YTD Price Performance
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Shares of ORI closed at $36.41 on Wednesday, near its 52-week high of $39.27. This proximity underscores investor confidence. It has the ingredients for further price appreciation.
ORI Trading Above 200-Day Moving Average
The stock is trading above its 200-day simple moving average (SMA) of $32.99, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
ORI’s Encouraging Growth Projections
The Zacks Consensus Estimate for Old Republic’s 2024 earnings per share indicates an increase of 3.8% from the year-ago reported number. The consensus estimate for revenues is pegged at $8.12 billion, implying a year-over-year improvement of 8.9%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 12.8% and 7.3%, respectively, from the corresponding 2024 estimates.
Earnings of Old Republic grew 10.3% in the last five years, better than the industry average of 9%. ORI has a solid surprise history. The multi-line insurer has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 27.63%.
Mixed Analyst Sentiment on ORI
Over the past 60 days, each of the two analysts covering the stock has lowered estimates for 2024, while two have raised the same for 2025.
The consensus estimate for 2024 has moved 3.5% south, while the consensus estimate for 2025 has moved 4.4% north in the past 60 days.
ORI’s Return on Capital
Old Republic’s trailing 12-month return on equity is 19.1%, ahead of the industry average of 15.3%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Also, the return on invested capital in the trailing 12 months was 10.5%, better than the industry average of 2.5%. This reflects the company’s efficiency in utilizing funds to generate income.
Key Drivers of Old Republic
Old Republic is poised to grow on solid market presence, niche focus, low property catastrophe exposure in its General Insurance segment and a strong capital position.
ORI’s General Insurance segment should continue to benefit from the combination of premium rate increases, high renewal retention ratios and new business production, including contributions from recently established insurance underwriting subsidiaries. Commercial auto, general liability and property should continue to achieve strong rate increases. This, in turn, has helped deliver a combined ratio below 96 for 14 years. ORI aims combined ratio between 90 and 95.
The Title business, on the other hand, should continue to benefit from an expanding presence in the commercial real estate market.
ORI’s Wealth Distribution
Banking on operational strength, this third-largest title insurer in the country distributes wealth to its shareholders in the form of dividends and share repurchases. ORI has an impressive dividend history banking on operational excellence. It has increased dividends for 43 straight years. It has been paying dividends for the last 83 years, besides paying special dividends occasionally, making it an attractive pick for yield-seeking investors.
Its board recently approved a $1.1 billion share buyback program. In the first nine months of 2024, ORI returned a total capital of approximately $975 million. Following the close of the quarter and through Oct. 31, 2024, ORI repurchased additional shares for $51.6 leaving $355.9 remaining under the current authorization.
Old Republic is one of the 111 companies that have posted at least 28 consecutive years of annual dividend growth. The insurer has returned 12.6% per share for the last 10 years to shareholders.
Headwinds
ORI’s net margin has been declining over the last couple of years. Though expenses have lowered, the margin contraction is owing to declining revenues. The insurer must strive to improve its revenues, or else margins will continue to erode.
ORI’s debt level has increased significantly over the last few years, and so has its interest expense. Times interest earned has been declining over the same time frame. The insurer must service its debt uninterruptedly, or else creditworthiness could be dented.
Parting Thoughts
High renewal retention ratios, new business, well-performing Title business, financial flexibility and prudent capital deployment should continue to favor ORI over the long term.
Old Republic should continue to benefit from favorable growth estimates, higher return on capital, as well as affordability of shares. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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