Fitch Downgrs Old Republic's IDR and Places Ratings on Watch Negative

CHICAGO--(Business Wire)--
Fitch Ratings has downgraded the Issuer Default Rating (IDR) and
commercial paper rating for Old Republic International Corporation
(ORI) to 'A+' and F1, respectively. The Insurer Financial Strength
ratings (IFS) of the property casualty insurance operating group and
Republic Mortgage Insurance Co. (RMIC) were downgraded to 'AA-' from
'AA', while the IFS ratings of the title insurance operating group
were downgraded to 'A+' from 'AA-'. All ratings were placed on Rating
Watch Negative. (See the full list at the end of this release.)

The downgrade reflects a substantial capital shortfall at RMIC
relative to the guidelines for the 'AA' rating category, as most
recently evaluated by Fitch's proprietary capital model, and increased
concerns over the performance of ORI's consumer credit indemnity (CCI)
program. Please refer to Fitch's mortgage industry press release
issued today for more details on the RMIC rating action.

Management has indicated that ORI intends to increase capital at
the mortgage insurance subsidiary at its discretion over the next 3-
to 18-month period. Based on its past capital raising approaches, the
company is likely to issue non-dilutive preferred or debt securities
and use proceeds to bolster capital at RMIC. However, the timing and
amount of a future capital contribution remain inconsistent with
Fitch's expectations for a mortgage insurer in the 'AA' rating
category. Fitch notes ORI has very good financial flexibility with
virtually no outstanding debt, but depending on the type of security
issued by ORI, the IDR could face further downgrade if leverage
increases significantly.

The CCI product provides first loss coverage to pools of primarily
second lien residential mortgage loans up to a cumulative loss limit
of 10% of eligible loans for any one policy year. The credit indemnity
program resides in the property casualty operations, and is
underwritten by Old Republic Insurance Company (ORINSCO) and shared
with two affiliated insurers through an internal reinsurance quota
share arrangement. Fitch believes that the performance of ORI's credit
indemnity product line is closely correlated with the performance of
its mortgage and title insurance businesses.

Historically, the Old Republic Group has benefited from the
diversification provided by its three primary lines of business:
commercial lines, property casualty, mortgage insurance and title
insurance. The severity of the mortgage industry downcycle has
resulted in significant deterioration in the operating results of both
Old Republic's mortgage insurance and title insurance operations, and
a modeled capital shortfall at RMIC. The stress from two-out-of-three
underperforming operating units is negatively affecting the overall
financial strength of the entire enterprise, resulting in the
one-notch downgrade.

The Negative Rating Watch reflects concern about the mortgage
industry downcycle which adversely affects ORI's mortgage insurance
and title insurance businesses as well as the CCI product.

Future rating actions on ORI and its subsidiaries will depend in
large part on whether future loss trends in its mortgage insurance and
second-lien portfolios decline materially from their current levels.
Consequently, the Negative Rating Watch will be resolved when more
definitive actual loss trends on the business emerge over the next one
to two years. If loss trends increase from present levels, the
probable resolution to the Negative Rating Watch will be another
single-notch downgrade of ratings at ORI and its property/casualty,
mortgage and title insurance subsidiaries.

Fitch has downgraded the following ratings, and placed them on
Rating Watch Negative:

Old Republic International Corp.

--Issuer Default Rating to 'A+' from 'AA-';

--Short term IDR to 'F1' from F1+';

--Commercial paper to 'F1' from F1+'.

Old Republic Property Casualty Group:

Bituminous Casualty Corp.

Bituminous Fire & Marine Insurance Co.

Great West Casualty Co.

Old Republic Insurance Co.

Old Republic Lloyds of Texas

Old Republic General Insurance Co.

Old Republic Surety Co.

--Insurer Financial Strength to 'AA-' from 'AA'.

Republic Mortgage Insurance Co.

--Insurer Financial Strength to 'AA-' from 'AA'.

Old Republic Title Group

--Insurer Financial Strength to 'A+' from 'AA-'.

Members of the Old Republic Title Group:

American Guaranty Title Insurance Co.

Mississippi Valley Title Insurance Co.

Old Republic General Title Insurance Co.

Old Republic National Title Insurance Co.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Douglas M. Pawlowski, CFA, +1-312-368-2054 (Chicago)
James B. Auden, CFA, +1-312-368-3146 (Chicago)
Davie Rodriguez, +1-212-908-0386 (New York)
Media Relations:
Kenneth Reed, +1-212-908-0540 (New York)

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