UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM	10-Q

☒	Quarterly report pursuant to section 13 or 15(d) of the Security Exchange Act of 1934
	for the quarterly period ended:	June 30, 2019
or
☐	Transition report pursuant to section 13 or 15(d) of the Security Exchange Act of 1934

Commission File Number: 001-10607

OLD REPUBLIC INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-2678171
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

307 North Michigan Avenue	Chicago	Illinois	60601
(Address of principal executive office)			(Zip Code)

Registrant's telephone number, including area code: 312-346-8100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock / $1 par value	ORI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: ☒ No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).Yes: ☐  No: ☒

The number of shares of the Registrant's Common Stock outstanding at June 30, 2019 was 303,201,054 .

There are 54 pages in this report

OLD REPUBLIC INTERNATIONAL CORPORATION
Report on Form 10-Q / June 30, 2019
INDEX
		PAGE NO.
PART I	FINANCIAL INFORMATION:
	CONSOLIDATED BALANCE SHEETS	3
	CONSOLIDATED STATEMENTS OF INCOME	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5
	CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND COMMON
	SHAREHOLDERS' EQUITY	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS	7
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	8 - 19
	MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS	20 - 50
	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	51
	CONTROLS AND PROCEDURES	51
PART II	OTHER INFORMATION:
	ITEM 1 - LEGAL PROCEEDINGS	52
	ITEM 1A - RISK FACTORS	52
	ITEM 6 - EXHIBITS	52
SIGNATURE		53
EXHIBIT INDEX		54

2

Old Republic International Corporation and Subsidiaries
Consolidated Balance Sheets
($ in Millions, Except Share Data)
	(Unaudited)
	June 30,			December 31,
	2019			2018
Assets
Investments:
Available for sale:
Fixed maturity securities (at fair value) (amortized cost: $8,371.5 and $8,285.0)	$	8,583.6		$	8,182.8
Short-term investments (at fair value which approximates cost)	353.7			354.9
Total	8,937.3			8,537.8
Held to maturity:
Fixed maturity securities (at amortized cost) (fair value: $1,061.3 and $1,034.5)	1,033.3			1,044.8
Equity securities (at fair value) (cost: $3,170.7 and $3,039.1)	3,894.6			3,380.9
Other investments	23.2			31.0
Total investments	13,888.6			12,994.6
Other Assets:
Cash	99.8			100.3
Accrued investment income	93.0			92.4
Accounts and notes receivable	1,736.1			1,499.4
Federal income tax recoverable: Current	—			16.8
Prepaid federal income taxes	129.8			129.8
Reinsurance balances and funds held	179.3			166.2
Reinsurance recoverable: Paid losses	78.4			55.9
Policy and claim reserves	3,719.8			3,428.6
Deferred policy acquisition costs	324.7			316.3
Sundry assets	737.6			526.3
Total Other Assets	7,099.0			6,332.4
Total Assets	$	20,987.7		$	19,327.1
Liabilities, Preferred Stock, and Common Shareholders' Equity
Liabilities:
Losses, claims, and settlement expenses	$	9,636.3		$	9,471.2
Unearned premiums	2,352.5			2,104.9
Other policyholders' benefits and funds	195.2			198.6
Total policy liabilities and accruals	12,184.1			11,774.8
Commissions, expenses, fees, and taxes	485.0			525.4
Reinsurance balances and funds	814.3			600.4
Federal income tax payable: Current	.3			—
Deferred	147.0			10.3
Debt	975.4			981.4
Sundry liabilities	487.3			288.3
Commitments and contingent liabilities
Total Liabilities	15,093.7			14,180.8
Preferred Stock (1)	—			—
Common Shareholders' Equity:
Common stock (1)	303.2			302.7
Additional paid-in capital	1,288.6			1,277.6
Retained earnings	4,326.7			3,849.8
Accumulated other comprehensive income (loss)	44.8			(210.0		)
Unallocated ESSOP shares (at cost)	(69.4		)	(73.9		)
Total Common Shareholders' Equity	5,893.9			5,146.2
Total Liabilities, Preferred Stock and Common Shareholders' Equity	$	20,987.7		$	19,327.1

________

(1) At June 30, 2019 and December 31, 2018, there were 75,000,000 shares of $0.01 par value preferred stock authorized, of which no shares were outstanding. As of the same dates, there were 500,000,000 shares of common stock, $1.00 par value, authorized, of which 303,201,054 and 302,714,502 were issued as of June 30, 2019 and December 31, 2018, respectively. At June 30, 2019 and December 31, 2018, there were 100,000,000 shares of Class B Common Stock, $1.00 par value, authorized, of which no shares were issued.

See accompanying Notes to Consolidated Financial Statements.

3

Old Republic International Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
($ in Millions, Except Share Data)
	Quarters Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
Revenues:
Net premiums earned	$	1,329.6		$	1,294.7	$	2,593.0		$	2,525.8
Title, escrow, and other fees	130.9			125.5		225.6			224.8
Total premiums and fees	1,460.5			1,420.2		2,818.6			2,750.6
Net investment income	113.0			106.9		225.1			212.7
Other income	34.1			30.1		64.5			60.7
Total operating revenues	1,607.7			1,557.3		3,108.3			3,024.2
Investment gains (losses):
Realized from actual transactions	12.5			32.0		24.9			47.5
Realized from impairments	(2.0		)	—		(2.0		)	—
Unrealized from changes in fair value of
equity securities	26.3			41.3		382.0			(110.6		)
Total realized and unrealized investment
gains (losses)	36.9			73.3		405.0			(63.1		)
Total revenues	1,644.7			1,630.7		3,513.4			2,961.1
Benefits, Claims and Expenses:
Benefits, claims and settlement expenses	629.9			601.0		1,228.4			1,191.2
Dividends to policyholders	5.3			6.3		12.9			10.1
Underwriting, acquisition, and other expenses	793.5			766.6		1,526.9			1,494.7
Interest and other charges	10.4			10.0		21.0			24.4
Total expenses	1,439.2			1,384.0		2,789.4			2,720.5
Income (loss) before income taxes (credits)	205.4			246.6		723.9			240.6
Income Taxes (Credits):
Current	30.6			35.4		74.3			61.4
Deferred	9.3			13.4		71.8			(22.7		)
Total	39.9			48.8		146.1			38.7
Net Income (Loss)	$	165.5		$	197.7	$	577.7		$	201.8
Net Income (Loss) Per Share:
Basic	$	.55		$	.66	$	1.93		$	.70
Diluted	$	.55		$	.66	$	1.92		$	.68
Average shares outstanding: Basic	299,418,182			299,738,944		299,341,472			289,117,369
Diluted	300,752,992			301,075,469		300,580,764			301,329,249

See accompanying Notes to Consolidated Financial Statements.

4

Old Republic International Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
($ in Millions)
	Quarters Ended					Six Months Ended
	June 30,					June 30,
	2019		2018			2019			2018
Net Income (Loss) As Reported	$	165.5	$	197.7		$	577.7		$	201.8
Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized gains (losses) before reclassifications,
not included in the statements of income	138.8		(62.9		)	313.2			(211.6		)
Amounts reclassified as realized investment (gains)
losses in the statements of income	2.4		(1.2		)	3.3			(1.7		)
Pretax unrealized gains (losses) on securities	141.2		(64.1		)	316.5			(213.3		)
Deferred income taxes (credits)	29.7		(13.5		)	66.7			(44.8		)
Net unrealized gains (losses) on securities, net of tax	111.4		(50.6		)	249.8			(168.4		)
Defined benefit pension plans:
Net pension adjustment before reclassifications	—		—			(2.6		)	—
Amounts reclassified as underwriting, acquisition,
and other expenses in the statements of income	1.0		.8			2.0			1.6
Net adjustment related to defined benefit
pension plans	1.0		.8			(.5		)	1.6
Deferred income taxes (credits)	.2		.1			(.1		)	.3
Net adjustment related to defined benefit pension
plans, net of tax	.8		.6			(.4		)	1.2
Foreign currency translation and other adjustments	3.1		(3.6		)	5.4			(7.3		)
Total other comprehensive income (loss)	115.4		(53.6		)	254.8			(174.6		)
Comprehensive Income (Loss)	$	280.9	$	144.1		$	832.6		$	27.2

See accompanying Notes to Consolidated Financial Statements.

5

Old Republic International Corporation and Subsidiaries
Consolidated Statements of Preferred Stock
and Common Shareholders' Equity (Unaudited)
($ in Millions)
	Quarters Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Convertible Preferred Stock:
Balance, beginning and end of period	$	—		$	—		$	—		$	—
Common Stock:
Balance, beginning of period	$	302.9		$	302.1		$	302.7		$	269.2
Dividend reinvestment plan	—			—			—			—
Net issuance of shares under stock based compensation plans	.2			.2			.4			.9
Conversion of senior debentures	—			—			—			32.2
Balance, end of period	$	303.2		$	302.4		$	303.2		$	302.4
Additional Paid-in Capital:
Balance, beginning of period	$	1,284.1		$	1,267.9		$	1,277.6		$	815.2
Dividend reinvestment plan	.2			.2			.4			1.2
Net issuance of shares under stock based compensation plans	3.1			2.9			5.9			13.1
Conversion of senior debentures	—			—			—			438.1
Stock based compensation	.3			.4			3.2			3.2
ESSOP shares released	.7			.6			1.3			1.2
Balance, end of period	$	1,288.6		$	1,272.2		$	1,288.6		$	1,272.2
Retained Earnings:
Balance, beginning of period	$	4,220.8		$	3,658.1		$	3,849.8		$	3,206.9
Change in accounting principle	—			—			18.4			502.1
Balance, beginning of period, as adjusted	4,220.8			3,658.1			3,868.3			3,708.9
Net income (loss)	165.5			197.7			577.7			201.8
Dividends on common shares ($.20, $.195, $.40 and $.39 per
common share)	(59.7		)	(58.1		)	(119.4		)	(113.1		)
Balance, end of period	$	4,326.7		$	3,797.7		$	4,326.7		$	3,797.7
Accumulated Other Comprehensive Income (Loss):
Balance, beginning of period	$	(70.6	)	$	(148.9	)	$	(210.0	)	$	474.2
Change in accounting principle	—			—			—			(502.1		)
Balance, beginning of period, as adjusted	(70.6		)	(148.9		)	(210.0		)	(27.9		)
Net unrealized gains (losses) on securities, net of tax	111.4			(50.6		)	249.8			(168.4		)
Net adjustment related to defined benefit pension plans,
net of tax	.8			.6			(.4		)	1.2
Foreign currency translation and other adjustments	3.1			(3.6		)	5.4			(7.3		)
Balance, end of period	$	44.8		$	(202.6	)	$	44.8		$	(202.6	)
Unallocated ESSOP Shares:
Balance, beginning of period	$	(71.7	)	$	(30.6	)	$	(73.9	)	$	(32.4	)
ESSOP shares released	2.2			1.7			4.5			3.4
Purchase of unallocated ESSOP shares	—			(37.4		)	—			(37.4		)
Balance, end of period	$	(69.4	)	$	(66.4	)	$	(69.4	)	$	(66.4	)

See accompanying Notes to Consolidated Financial Statements.

6

Old Republic International Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
($ in Millions)
	Six Months Ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	577.7		$	201.8
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Deferred policy acquisition costs	(8.3		)	(14.8		)
Premiums and other receivables	(236.8		)	(210.4		)
Unpaid claims and related items	84.6			93.5
Unearned premiums and other policyholders' liabilities	33.3			70.9
Income taxes	87.1			(20.7		)
Reinsurance balances and funds	178.0			151.4
Realized investment (gains) losses from actual transactions and impairments	(22.9		)	(47.5		)
Unrealized investment (gains) losses from changes in fair value
of equity securities	(382.0		)	110.6
Accounts payable, accrued expenses and other	2.6			(47.4		)
Total	313.4			287.3
Cash flows from investing activities:
Fixed maturity securities:
Available for sale:
Maturities and early calls	298.7			473.8
Sales	303.5			181.5
Sales of:
Equity securities	208.7			278.6
Other - net	25.8			8.2
Purchases of:
Fixed maturity securities:
Available for sale	(689.6		)	(600.6		)
Equity securities	(313.1		)	(350.8		)
Other - net	(30.9		)	(23.6		)
Net decrease (increase) in short-term investments	1.5			152.8
Other - net	—			(.7		)
Total	(195.1		)	119.2
Cash flows from financing activities:
Issuance of common shares	6.9			9.7
Redemption of debentures and notes	(6.5		)	(4.7		)
Purchase of unallocated common shares by ESSOP	—			(37.4		)
Dividends on common shares (including a special dividend declared in
December 2017 and paid in January 2018 of $269.2)	(119.4		)	(382.3		)
Other - net	—			(9.8		)
Total	(118.8		)	(424.6		)
Increase (decrease) in cash	(.5		)	(18.0		)
Cash, beginning of period	100.3			125.9
Cash, end of period	$	99.8		$	107.9
Supplemental cash flow information:
Cash paid (received) during the period for: Interest	$	20.9		$	29.7
Income taxes	$	59.6		$	59.6

See accompanying Notes to Consolidated Financial Statements.

7

OLD REPUBLIC INTERNATIONAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

($ in Millions, Except Share Data)

1. Accounting Policies and Basis of Presentation:

The accompanying consolidated financial statements have been prepared in conformity with the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") of accounting principles generally accepted in the United States of America ("GAAP"). These interim financial statements should be read in conjunction with these notes and those included in the Company's 2018 Annual Report on Form 10-K incorporated herein by reference.

Pertinent accounting and disclosure pronouncements issued from time to time by the FASB are adopted by the Company as they become effective. Recent ones are discussed below.

a) Effective January 1, 2019, the Company adopted FASB guidance on lease accounting which requires balance sheet recognition of all leases with a term greater than 12 months. The Company's adoption of this guidance is discussed in Note 7.

b) Effective January 1, 2018, the Company adopted FASB guidance on the recognition and measurement of financial instruments. See Note 3.

c) Effective January 1, 2018, the Company adopted the FASB's comprehensive revenue recognition standard which applies to contracts with customers, except for those that fall within the scope of other standards, such as insurance contracts. The Company’s adoption of this standard did not have an effect on its insurance contract revenues, and based on its evaluation of certain less significant revenue streams generated from contracts with customers, did not have a material impact on the consolidated financial statements taken as a whole.

d) In June 2016, the FASB issued guidance on accounting for credit losses on financial instruments which will be effective in 2020. The guidance will require immediate recognition of expected credit losses for certain financial instruments including (1) reinsurance recoverables, (2) held to maturity securities and (3) accounts and notes receivable. Additionally, the guidance modifies the impairment model for available for sale fixed maturity securities. The Company is currently evaluating the guidance to determine the potential impact of its adoption on its consolidated financial statements.

The financial accounting and reporting process relies on estimates and on the exercise of judgment. In the opinion of management all adjustments consisting only of normal recurring accruals necessary for a fair presentation of interim periods' results and financial position have been recorded. Amounts shown in the consolidated financial statements and applicable notes are stated (except as otherwise indicated and as to share data) in millions, which amounts may not add to totals shown due to truncation. Necessary reclassifications are made in prior periods' financial statements whenever appropriate to conform to the most current presentation.

2. Common Share Data:

Earnings Per Share - Consolidated basic earnings per share excludes the dilutive effect of common stock equivalents and is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares actually outstanding for the quarterly and year-to-date periods. Diluted earnings per share are similarly calculated with the inclusion of dilutive common stock equivalents. The following table provides a reconciliation of net income (loss) and the number of shares used in basic and diluted earnings per share calculations.

8

	Quarters Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Numerator:
Net income (loss)	$	165.5	$	197.7	$	577.7	$	201.8
Numerator for basic earnings per share -
income (loss) available to common stockholders	165.5		197.7		577.7		201.8
Adjustment for interest expense incurred on
assumed conversion of convertible notes	—		—		—		3.1
Numerator for diluted earnings per share -
income (loss) available to common stockholders
after assumed conversion of convertible notes	$	165.5	$	197.7	$	577.7	$	204.9
Denominator:
Denominator for basic earnings per share -
weighted-average shares (a)	299,418,182		299,738,944		299,341,472		289,117,369
Effect of dilutive securities - stock based
compensation awards	1,334,810		1,336,525		1,239,292		1,385,141
Effect of dilutive securities - convertible notes	—		—		—		10,826,739
Denominator for diluted earnings per share -
adjusted weighted-average shares
and assumed conversion of convertible notes (a)	300,752,992		301,075,469		300,580,764		301,329,249
Earnings per share: Basic	$	.55	$	.66	$	1.93	$	.70
Diluted	$	.55	$	.66	$	1.92	$	.68
Anti-dilutive common stock equivalents
excluded from earnings per share computations:
Stock based compensation awards	1,163,250		1,539,500		3,268,875		1,539,500
Convertible senior notes	—		—		—		—
Total	1,163,250		1,539,500		3,268,875		1,539,500

__________

(a) In calculating earnings per share, pertinent accounting rules require that common shares owned by the Company's Employee Savings and Stock Ownership Plan that are not yet allocated to participants in the plan be excluded from the calculation. Such shares are issued and outstanding, and have the same voting and other rights applicable to all common shares.

3. Investments:

The Company classifies its fixed maturity securities as those it either (1) has the positive intent and ability to hold until maturity, (2) has available for sale or (3) has the intention of trading.

Fixed maturity securities classified as "available for sale" are reported at fair value with changes in such values, net of deferred income taxes, reflected directly in shareholders' equity. Fixed maturity securities classified as "held to maturity" are carried at amortized cost. Equity securities are reported at fair value with changes in such values reflected as unrealized investment gains (losses) in the consolidated statements of income. Fair values for fixed maturity securities and equity securities are based on quoted market prices or estimates using values obtained from recognized independent pricing services.

The status and fair value changes of each of the fixed maturity investments are reviewed at least once per quarter during the year, and estimates of other-than-temporary impairments ("OTTI") in the portfolio's value are evaluated and established at each quarterly balance sheet date. In reviewing investments for OTTI, the Company, in addition to a security's market price history, considers the totality of such factors as the issuer's operating results, financial condition and liquidity, its ability to access capital markets, credit rating trends, most current audited financial statements, industry and securities markets conditions, and analyst expectations to reach its conclusions. Sudden fair value declines caused by such adverse developments as newly emerged or imminent bankruptcy filings, issuer default on significant obligations, or reports of financial accounting developments that bring into question the validity of the issuer's previously reported earnings or financial condition, are recognized as realized losses as soon as credible publicly available information emerges to confirm such developments. In the event the Company's estimate of OTTI is insufficient at any point in time, future periods' net income (loss) would be adversely affected by the recognition of additional impairment losses, but its financial position would not necessarily be affected adversely inasmuch as such losses, or a portion of them, could have been recognized previously as unrealized losses directly in shareholders' equity. The Company recognized $2.0 of OTTI adjustments for the quarter and six months ended June 30, 2019 and no OTTI adjustments for the same periods of 2018.

9

The amortized cost and estimated fair values by type and contractual maturity of fixed maturity securities are shown in the following tables. Expected maturities will differ from contractual maturities since borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed Maturity Securities by Type:
June 30, 2019:
Available for sale:
U.S. & Canadian Governments	$	1,569.4	$	34.6	$	.7	$	1,603.3
Corporate	6,802.0		186.1		7.8		6,980.2
	$	8,371.5	$	220.7	$	8.6	$	8,583.6
Held to maturity:
Tax-exempt	$	1,033.3	$	28.2	$	.2	$	1,061.3
December 31, 2018:
Available for sale:
U.S. & Canadian Governments	$	1,535.3	$	5.7	$	16.5	$	1,524.4
Corporate	6,749.6		31.4		122.7		6,658.3
	$	8,285.0	$	37.1	$	139.2	$	8,182.8
Held to maturity:
Tax-exempt	$	1,044.8	$	3.5	$	13.7	$	1,034.5

	Amortized Cost		Estimated Fair Value
Fixed Maturity Securities Stratified by Contractual Maturity at June 30, 2019:
Available for sale:
Due in one year or less	$	729.9	$	732.8
Due after one year through five years	4,757.3		4,850.2
Due after five years through ten years	2,839.0		2,951.5
Due after ten years	45.1		48.9
	$	8,371.5	$	8,583.6
Held to maturity:
Due in one year or less	$	—	$	—
Due after one year through five years	260.5		264.3
Due after five years through ten years	772.7		797.0
Due after ten years	—		—
	$	1,033.3	$	1,061.3

The following tables reflect the Company's gross unrealized losses and fair value, aggregated by category and length of time that individual available for sale and held to maturity fixed maturity securities have been in an unrealized loss position.

10

	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
June 30, 2019:
Fixed Maturity Securities:
Available for sale:
U.S. & Canadian Governments	$	—	$	—	$	308.3	$	.7	$	308.3	$	.7
Corporate	130.9		2.5		444.5		5.3		575.5		7.8
	$	130.9	$	2.5	$	752.8	$	6.0	$	883.8	$	8.6
Number of available for sale
securities in unrealized
loss position			27				165				192
Held to maturity:
Tax-exempt	$	—	$	—	$	81.5	$	.2	$	81.5	$	.2
Number of held to maturity
securities in unrealized