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Old Republic Posts 1Q Loss on Mortgage, Title Insurance

April 25, 2008

Old Republic International Corp. lost money in the first quarter as the troubled housing market hamstrung two of the insurer's biggest segments, the company said Thursday.

Old Republic lost $19 million, or 8 cents per share, in the first quarter, compared with profit of $107.7 million, or 46 cents per share, in the first quarter last year.

Analysts polled by Thomson Financial forecast a loss of 2 cents per share.

Premiums slipped 2 percent to $950.7 million from $970.9 million.

Two Old Republic businesses are dragging the rest of the company into the red: mortgage insurance and title insurance.

Mortgage insurance is a contract promising to repay a home lender when a borrower defaults, and title insurance is insurance that covers costs when a deed transferring ownership of a house has a mistake or problem.

Both these lines of insurance pivot on the health of the housing market.

People generally buy title insurance only when a house is sold, so fewer home sales mean fewer customers for title insurance. With home sales in a funk, title insurance premiums dwindled 23 percent in the first quarter. The division lost $12.6 million.

And mortgage borrowers are less likely to repay their home loans if their houses are losing value, so flagging property values tend to force more defaults and thus more insurance claims.

The mortgage insurance division spent $1.98 of each premium dollar administering claims, and the segment lost $122.3 million in the quarter.

Old Republic said it thinks the "substantial dislocations that have enveloped all businesses with housing and mortgage-lending exposures are likely to exert earnings pressure well into 2009."

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