Old Republic to File Third Quarter, 2009 SEC Form 10-Q Report With an Unresolved Revenue Accounting Matter

Old Republic to File Third Quarter, 2009 SEC Form 10-Q Report With an
Unresolved Revenue Accounting Matter

CHICAGO, Nov. 3 /PRNewswire-FirstCall/ -- Old Republic International
Corporation (NYSE: ORI) today announced that it will shortly file its third
quarter 2009 Form 10-Q report with the Securities and Exchange Commission.
The filing will take place even though the Company's independent auditors,
PricewaterhouseCoopers LLP ("PwC") have communicated their disagreement with
the Company's treatment of certain third quarter 2009 reinsurance transactions
consummated by the Company's Mortgage Guaranty subsidiary. The transactions
and the financial statement treatment afforded to them were disclosed in the
Company's October 22, 2009 earnings press release as follows:

"During this year's third quarter, the Mortgage Guaranty Group recaptured
business previously ceded to several captives. In substance, the transactions
are cut-off reinsurance arrangements whereby the captives have remitted to the
Company the reserves on existing claim obligations and a risk premium for
claims that will occur after the recapture date. Accordingly, the Company
recorded proceeds of $148.9 million and established a combination of claim
reserves ($68.4 million) and premium reserves ($82.5 million) all of which
resulted in little consequential effect on the pretax loss for the quarter and
first nine months of 2009."

To effect the transactions the Company calculated a necessary, actuarially
determined total premium designed to at least cover all future claims
occurring after termination of the existing reinsurance contracts. The
economic basis of the premium offered and agreed to by the captives consisted
of the combination of an initial front end risk premium ($82.5 million) paid
in cash and marketable securities, and a subsequent additional risk premium
equal to all estimated future renewal premiums that would have otherwise
inured to the captives had the reinsurance agreements remained in place.
Accordingly, to reflect the economic substance of the cut-off reinsurance
arrangements, the initial front end risk premium has been recorded as a
balance sheet unearned premium reserve. This reserve will revert to earned
premiums in future periods' income statements pursuant to an amortization
schedule that simulates the estimated timing of the future renewal risk
premiums that will henceforth be retained by the Company. In so doing, the
Company will be consistent with its own and generally accepted industry-wide
insurance accounting practices pertaining to cut-off reinsurance arrangements
and, assuming the reasonableness of its usual risk transfer pricing
methodology, its consequent underwriting results should not be materially
better or worse than they would have been if the reinsurance agreements had
remained in place.

PwC has informed the Company that based on its analysis of the transactions
and interpretation of generally accepted accounting principles ("GAAP"), it
has concluded that immediate recognition of a gain in the amount of $82.5
million is required in the third quarter of 2009. In addition, PwC has
advised that, as a result of this disagreement, it is unable to complete its
review of the Company's consolidated financial statements included in the
third quarter 2009 Form 10-Q.

In Old Republic management's opinion, recognition of the $82.5 million initial
front end risk premium as a current period revenue and bottom line gain would
create the appearance of much improved third quarter 2009 results when none
existed or occurred. Given the economic substance of the transactions, the
appearance so created would also cause misleading inferences relative to such
matters as trends in premium revenue and claim costs as well as the actual
underwriting results of Old Republic's Mortgage Guaranty line for the nine
quarterly periods since the onset of economic dislocations.

In view of the un-reconciled financial accounting positions taken by the
Company and its independent auditors, Old Republic intends to petition the SEC
to seek resolution of the matter.

Since there is no assurance that the Company's position will prevail, this
press release is being issued to alert shareholders, rating agencies, and
others who may be relying on the Company's published financial reports to the
possibility that its accounting methodology in the above regards might not be
sustained. In the latter circumstance, and with the further assumption that
PwC's financial accounting position would be deemed preferable by the SEC,
then Old Republic would be required to restate its previously issued financial
statements for the three and nine months ended September 30, 2009. A
summarized version of financial statements and pertinent statistics reflecting
such possible restatement is shown in the accompanying table.

About Old Republic
Chicago-based Old Republic International Corporation is an insurance holding
company whose subsidiaries market, underwrite and provide risk management
services for a wide variety of coverages primarily in the property &
liability, mortgage guaranty, and title insurance fields. One of the nation's
50 largest publicly owned insurance organizations, Old Republic has assets of
approximately $14.30 billion and shareholders' equity of $3.90 billion or
$16.54 per share. Its current stock market valuation is approximately $2.5
billion, or $10.65 per share.

The nature of Old Republic's business requires that it be managed for the long
run. For the 25 years ended in 2008, the Company's total market return, with
dividends reinvested, has grown at a compounded annual rate of 9.6 percent per
share. For the same period, the total market return, with dividends
reinvested, for the S&P 500 Index has grown at a 9.8 percent annual compound
rate. During those years, Old Republic's shareholders' equity account,
inclusive of cash dividends, has risen at an average annual rate of 12.1
percent per share, and the regular cash dividend has grown at a 10.3 percent
annual compound rate. According to the most recent edition of Mergent's
Dividend Achievers, Old Republic is one of just 120 companies, out of
10,000-plus publicly held corporations, that have posted at least 25
consecutive years of annual dividend growth.

Safe Harbor Statement
Historical data pertaining to the operating results, liquidity, and other
performance indicators applicable to an insurance enterprise such as Old
Republic are not necessarily indicative of results to be achieved in
succeeding years. In addition to the factors cited below, the long-term nature
of the insurance business, seasonal and annual patterns in premium production
and incidence of claims, changes in yields obtained on invested assets,
changes in government policies and free markets affecting inflation rates and
general economic conditions, and changes in legal precedents or the
application of law affecting the settlement of disputed and other claims can
have a bearing on period-to-period comparisons and future operating results.

Some of the oral or written statements made in the Company's reports, press
releases, and conference calls following earnings releases, can constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Of necessity, any such forward-looking
statements involve assumptions, uncertainties, and risks that may affect the
Company's future performance. With regard to Old Republic's General Insurance
segment, its results can be affected, in particular, by the level of market
competition, which is typically a function of available capital and expected
returns on such capital among competitors, the levels of interest and
inflation rates, and periodic changes in claim frequency and severity patterns
caused by natural disasters, weather conditions, accidents, illnesses,
work-related injuries, and unanticipated external events. Mortgage Guaranty
and Title Insurance results can be affected by similar factors, and by changes
in national and regional housing demand and values, the availability and cost
of mortgage loans, employment trends, and default rates on mortgage loans.
Mortgage Guaranty results, in particular, may also be affected by various
risk-sharing arrangements with business producers, as well as the risk
management and pricing policies of government sponsored enterprises. Life and
health insurance earnings can be affected by the levels of employment and
consumer spending, variations in mortality and health trends, and changes in
policy lapsation rates. At the parent holding company level, operating
earnings or losses are generally reflective of the amount of debt outstanding
and its cost, interest income on temporary holdings of short-term investments,
and period-to-period variations in the costs of administering the Company's
widespread operations.

A more detailed listing and discussion of the risks and other factors which
affect the Company's risk-taking insurance business are included in Part I,
Item 1A - Risk Factors, of the Company's 2008 Form 10-K annual report to the
Securities and Exchange Commission, which Item is specifically incorporated
herein by reference.

Any forward-looking statements or commentaries speak only as of their dates.
Old Republic undertakes no obligation to publicly update or revise any and all
such comments, whether as a result of new information, future events or
otherwise, and accordingly they may not be unduly relied upon.

Accompanying Financial Data:
-- Old Republic International Corporation: Unresolved Mortgage Guaranty
Revenue Recognition Accounting Matter

For the latest news releases and other corporate documents on Old
Republic:
write to:
Investor Relations
Old Republic International Corporation
307 North Michigan Avenue
Chicago, IL 60601
312-346-8100
or visit us at www.oldrepublic.com.

Old Republic International Corporation:
Unresolved Mortgage Guaranty Revenue Recognition Accounting Matter(*)
($in millions, except per share data)
------------------------------------------------------------------------

ORI Consolidated
------------------------------------------------------------------------
Quarters Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
With With
Possible Possible
Restate- Restate-
As Reported ment(*) As Reported ment(*)
2008 2009 2009 2008 2009 2009
------- ------- ------- ------- ------- -------
Net premiums
and fees
earned $835.2 $856.1 $938.6 $2,517.5 $2,445.4 $2,527.9
Net benefits
and claims
incurred 683.2 671.2 671.2 2,017.1 1,962.8 1,962.8
Pretax
operating
income (loss) (80.1) (110.7) (28.2) (208.3) (289.6) (207.1)
Income
taxes
(credits) (34.8) (44.6) (15.7) (93.3) (119.9) (91.0)
------- ------- ------- ------- ------- -------
Net operating
income (loss) $(45.3) $(66.1) $(12.5) $(114.9) $(169.6) $(116.0)
======= ======= ======= ======= ======= =======
Net operating
income (loss)
per diluted
share $(.20) $(.28) $(.05) $(.50) $(.72) $(.49)
======= ======= ======= ======= ======= =======
Benefits
and claim
ratio 81.8% 78.4% 71.5% 80.1% 80.3% 77.6%
======= ======= ======= ======= ======= =======

Ending Shareholders' Equity:
Total $3,914.3 $3,901.3 $3,954.9
Per common
share $16.96 $16.54 $16.77
======= ======= =======

ORI Mortgage Guaranty Segment
------------------------------------------------------------------------
Quarters Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
With With
Possible Possible
Restate- Restate-
As Reported ment(*) As Reported ment(*)
2008 2009 2009 2008 2009 2009
------- ------- ------- ------- ------- -------

Net premiums
earned $148.4 $138.9 $221.4 $445.2 $425.8 $508.3
Net claims
incurred 301.3 297.3 297.3 855.9 867.7 867.7
Pretax
operating
income (loss) (152.8) (160.4) (77.9) (415.9) (443.0) (360.5)
Income
taxes
(credits) (54.8) (57.4) (28.5) (149.7) (159.1) (130.2)
------- ------- ------- ------- ------- -------
Net operating
Income
(loss) $(97.9) $(102.9) $(49.3) $(266.2) $(283.8) $(230.2)
======= ======= ======= ======= ======= =======
Claim ratio 203.1% 214.0% 134.3% 192.3% 203.8% 170.7%
======= ======= ======= ======= ======= =======

Net Net Operating
Premiums Earned Claim Ratio Income (Loss)
----------------- ----------------- -----------------
With With With
Possible Possible Possible
As Restate- As Restate- As Restate-
Reported ment(*) Reported ment(*) Reported ment(*)
------- ------- ------- ------- ------- -------
3rd Quarter
2007 $133.9 $133.9 161.9% 161.9% $(52.6) $(52.6)
4th Quarter
2007 141.2 141.2 178.7 178.7 (71.5) (71.5)
1st Quarter
2008 147.6 147.6 181.1 181.1 (78.1) (78.1)
2nd Quarter
2008 149.1 149.1 192.5 192.5 (90.0) (90.0)
3rd Quarter
2008 148.4 148.4 203.1 203.1 (97.9) (97.9)
4th Quarter
2008 147.2 147.2 220.5 220.5 (114.5) (114.5)
1st Quarter
2009 145.3 145.3 199.9 199.9 (92.6) (92.6)
2nd Quarter
2009 141.5 141.5 197.7 197.7 (88.3) (88.3)
3rd Quarter
2009 $138.9 $221.4 214.0% 134.3% $(102.9) $(49.3)
======= ======= ======= ======= ======= =======

(*) Data in the columns headed "With Possible Restatement" shows the
effect that the immediate recognition of the initial front end risk
premium would have on ORI's reported earnings and trends therein for
the three and nine months ended September 30, 2009 and in relation to
preceding quarters.

SOURCE Old Republic International Corporation

A.C. Zucaro, Chairman & CEO of Old Republic International Corporation,
+1-312-346-8100; or Leslie Loyet, Analysts/Investors of Financial Relations
Board, +1-312-640-6672, lloyet@mww.com