Old Republic International Corporation ORI closed at $35.33 on Wednesday, near its 52-week high of $36.09. This proximity underscores investor confidence. It has the ingredients for further price appreciation. The stock is trading above the 50-day and 200-day simple moving average (SMA) of $34.75 and $31.15, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

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 9.06%.

Shares of ORI have gained 20.2% year to date (YTD), outperforming the industry’s, the Finance sector’s and the Zacks S&P 500 composite’s growth of 18.5%, 14.9% and 20%, respectively.

ORI Outperforms Industry, Sector, S&P

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ORI’s Growth Projection Encourages

The Zacks Consensus Estimate for Old Republic’s 2024 earnings per share indicates a year-over-year increase of 7.6%. The consensus estimate for revenues is pegged at $7.99 billion, implying a year-over-year improvement of 7.2%. The consensus estimate for 2025 earnings per share and revenues indicates an increase of 4.4% and 5.6%, respectively, from the corresponding 2024 estimates.

ORI Shares Are Affordable

The stock is undervalued compared with its industry. It is currently trading at a price-to-book multiple of 1.52, lower than the industry average of 2.72. The insurer has an impressive Value Score of B. 

Shares of other multi-line insurers like MGIC Investment Corporation MTG, Enact Holdings, Inc. ACT and Radian Group Inc. RDN are also trading at a discount to the industry average.

ORI’s Return on Invested Capital

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

Factors Acting in Favor of Old Republic

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

ORI’s General Insurance segment should continue to benefit from the combination of premium rate increases, high renewal retention ratios and new business production, including contributions from recently established insurance underwriting subsidiaries. Commercial auto, general liability and property should continue to achieve strong rate increases. This, in turn, has helped deliver a combined ratio below 96 for 14 years. ORI aims combined ratio between 90 and 95.

The Title business, on the other hand, should continue to benefit from an expanding presence in the commercial real estate market.

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

Old Republic is one of the 111 companies that have posted at least 28 consecutive years of annual dividend growth. The insurer has returned 12.6% per share for the last 10 years to shareholders.

Risks to ORI

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. In fact, 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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MGIC Investment Corporation (MTG) : Free Stock Analysis Report

Radian Group Inc. (RDN) : Free Stock Analysis Report

Old Republic International Corporation (ORI) : Free Stock Analysis Report

Enact Holdings, Inc. (ACT) : Free Stock Analysis Report

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