SEC Company Response from OLD REPUBLIC INTERNATIONAL CORP (ORI) (CIK 0000074260) (ORI) — May 21, 2009
OLD REPUBLIC INTERNATIONAL CORP (ORI) (CIK 0000074260)
Date: May 21, 2009 · CIK: 0000074260 · Accession: 0000074260-09-000064
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-10607
Referenced dates: April 20, 2009
Letter
United States Securities and Exchange Commission Re: Old Republic International Corporation Form 10-K, fiscal year ended December 31, 2008 File No. 001-10607
Dear Mr. Rosenberg,
We have reviewed the comments on our above referenced filing in your letter dated April 20, 2009. Old Republic’s response to the Commission’s comments is as follows:
Notes to Consolidated financial Statements
Note 1: Summary of Significant Accounting Policies
(h) Losses, Claims and Settlement Expenses, page 60
Comment
Regarding your policy for establishing a loss reserve for your mortgage guaranty line of business:
·
Revise to clarify, if true, that a reserve is established only upon default;
·
Define in your disclosure what default means; and
·
Disclose the dollar amount of the reserve that represents IBNR at each balance sheet presented.
Response
In order to clarify the Company’s disclosures in this area we propose to replace the disclosure in footnote 1 (h) Losses, Claims and Settlement Expenses on page 61 of the December 31, 2008 Form 10-K with the following disclosure (additions italicized) on a prospective basis beginning with the June 30, 2009 Form 10-Q Management Analysis of Financial Position and Results of Operations and the December 31, 2009 Form 10-K Notes to Consolidated Financial Statements:
“Mortgage guaranty insurance reserves for unpaid claims and claim adjustment expenses are established only upon an instance of default, defined as an insured mortgage loan that has missed 2 or more consecutive monthly payments. Loss reserves are based on statistical calculations that take into account the number of reported insured mortgage loan defaults as of each balance sheet date, as well as experience-based estimates of loan defaults that have occurred but have not as yet been reported (IBNR). Further, the loss reserve estimating process takes into account a large number of variables including trends in claim severity, potential salvage recoveries, expected cure rates for reported loan delinquencies at various stages of default, the level of policy rescissions for non-compliance with terms of the master policy, and management judgments relative to future employment levels, housing market activity, and mortgage loan interest costs, demand and extensions. Mortgage guaranty net claim and loss adjustment expense reserves reported as of June 30, 2009 and December 31, 2008 included $____ and $67.3 attributable to net IBNR claim estimates at each corresponding balance sheet date. ”
Comment
For each line item under “incurred claims and claim adjustment expenses” and “payments” in the table showing an analysis of changes in aggregate reserves, please disclose for each period presented the amount attributable to each major business segment (i.e. General, Mortgage Guaranty and Title).
Response
We propose to replace the table shown at the top of page 62 of the December 31, 2008 Form 10-K with the following table in the December 31, 2009 Form 10-K:
The following table shows an analysis of changes in aggregate reserves for the Company's losses, claims and settlement expenses for each of the years shown:
Years Ended December 31,
Gross reserves at beginning of year
$
7,241.3
$
6,231.1
$
5,534.7
Less: reinsurance losses recoverable
2,227.0
1,984.7
1,936.6
Net reserves at beginning of year
5,014.2
4,246.3
3,598.0
Incurred claims and claim adjustment expenses:
Provisions for insured events of the current year:
General Insurance
1,520.1
1,562.8
Mortgage Guaranty
1,199.5
551.3
Title Insurance
46.3
72.3
Other
41.9
37.8
Sub-total
2,807.8
2,224.2
Change in provision for insured events of prior years:
General Insurance
(83.0)
(110.6)
Mortgage Guaranty
(18.7)
64.4
Title Insurance
(0.6)
(16.3)
Other
(3.8)
(3.6)
Sub-total
(106.1)
(66.1)
Total incurred claims and claim adjustment expenses
2,701.6
2,158.1
Payments:
Claims and claim adjustment expenses attributable to
insured events of the current year:
General Insurance
549.0
518.7
Mortgage Guaranty
59.8
29.6
Title Insurance
5.4
7.5
Other
30.3
23.9
Sub-total
644.5
579.7
Claims and claim adjustment expenses attributable to
insured events of prior years:
General Insurance
840.8
676.3
Mortgage Guaranty
383.2
190.8
Title Insurance
54.8
55.8
Other
10.2
7.1
Sub-total
1,289.0
930.0
Total payments
1,933.5
1,509.8
Amount of reserves for unpaid claims and claim adjustment
expenses at the end of each year, net of reinsurance
losses recoverable
5,014.2
4,246.3
Reinsurance losses recoverable
2,227.0
1,984.7
Gross reserves at end of year
$
$
7,241.3
$
6,231.1
*****
With this letter Old Republic also acknowledges that:
·
The Company is responsible for the adequacy and accuracy of the disclosure in the above referenced filings;
·
Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
·
The Company may not assert the Commission staff’s comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
We trust that the discussion above is responsive to the Commission’s comments. Please feel free to contact me at (312) 762-4229 if you have any comments or questions.
Very truly
yours,
/s/ Karl W.
Mueller
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CORRESP
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filename1.htm
secletter051809.htm
307 North Michigan
Avenue
Chicago,
Illinois 60601-5382
312/346-8100
May 18,
2009
Mr. Jim B.
Rosenberg
Senior Assistant
Chief Accountant
United States
Securities and Exchange Commission
100 F Street,
N.E.
Mail Stop
4720
Washington, DC
20549
Re:
Old Republic
International Corporation
Form 10-K,
fiscal year ended December 31, 2008
File No.
001-10607
Dear Mr.
Rosenberg,
We have reviewed
the comments on our above referenced filing in your letter dated April 20,
2009. Old Republic’s response to the Commission’s comments is as
follows:
Notes to Consolidated
financial Statements
Note 1: Summary
of Significant Accounting Policies
(h) Losses, Claims and
Settlement Expenses, page 60
Comment
1
Regarding your
policy for establishing a loss reserve for your mortgage guaranty line of
business:
·
Revise to
clarify, if true, that a reserve is established only upon
default;
·
Define in
your disclosure what default means;
and
·
Disclose the
dollar amount of the reserve that represents IBNR at each balance sheet
presented.
Response
In order to clarify
the Company’s disclosures in this area we propose to replace the disclosure in
footnote 1 (h) Losses, Claims and Settlement Expenses on page 61 of the December
31, 2008 Form 10-K with the following disclosure (additions italicized) on a
prospective basis beginning with the June 30, 2009 Form 10-Q Management Analysis
of Financial Position and Results of Operations and the December 31, 2009 Form
10-K Notes to Consolidated Financial Statements:
“Mortgage guaranty insurance reserves
for unpaid claims and claim adjustment expenses are established only upon an
instance of default, defined as an insured mortgage loan that has missed 2 or
more consecutive monthly payments. Loss reserves
are based on statistical calculations that take into account the number of
reported insured mortgage loan defaults as of each balance sheet date, as well
as experience-based estimates of loan defaults that have occurred but have not
as yet been reported (IBNR). Further, the loss reserve estimating
process takes into account a large number of variables including trends in claim
severity, potential salvage recoveries, expected cure rates for reported loan
delinquencies at various stages of default, the level of policy rescissions for
non-compliance with terms of the master policy, and management judgments
relative to future employment levels, housing market activity, and mortgage loan
interest costs, demand and extensions. Mortgage guaranty net claim and loss
adjustment expense reserves reported as of June 30, 2009 and December 31, 2008
included $____ and $67.3 attributable to net IBNR claim estimates at each
corresponding balance sheet date. ”
Comment
2
For each line item
under “incurred claims and claim adjustment expenses” and “payments” in the
table showing an analysis of changes in aggregate reserves, please disclose for
each period presented the amount attributable to each major business segment
(i.e. General, Mortgage Guaranty and Title).
Response
We propose to
replace the table shown at the top of page 62 of the December 31, 2008 Form 10-K
with the following table in the December 31, 2009 Form 10-K:
The following table
shows an analysis of changes in aggregate reserves for the Company's losses,
claims and settlement expenses for each of the years shown:
Years Ended
December 31,
2009
2008
2007
Gross
reserves at beginning of
year
$
7,241.3
$
6,231.1
$
5,534.7
Less:
reinsurance losses recoverable
2,227.0
1,984.7
1,936.6
Net reserves
at beginning of
year
5,014.2
4,246.3
3,598.0
Incurred
claims and claim adjustment expenses:
Provisions
for insured events of the current year:
General
Insurance
1,520.1
1,562.8
Mortgage
Guaranty
1,199.5
551.3
Title
Insurance
46.3
72.3
Other
41.9
37.8
Sub-total
2,807.8
2,224.2
Change in
provision for insured events of prior years:
General
Insurance
(83.0)
(110.6)
Mortgage
Guaranty
(18.7)
64.4
Title
Insurance
(0.6)
(16.3)
Other
(3.8)
(3.6)
Sub-total
(106.1)
(66.1)
Total
incurred claims and claim adjustment expenses
2,701.6
2,158.1
Payments:
Claims and
claim adjustment expenses attributable to
insured
events of the current year:
General
Insurance
549.0
518.7
Mortgage
Guaranty
59.8
29.6
Title
Insurance
5.4
7.5
Other
30.3
23.9
Sub-total
644.5
579.7
Claims and
claim adjustment expenses attributable to
insured
events of prior years:
General
Insurance
840.8
676.3
Mortgage
Guaranty
383.2
190.8
Title
Insurance
54.8
55.8
Other
10.2
7.1
Sub-total
1,289.0
930.0
Total
payments
1,933.5
1,509.8
Amount of
reserves for unpaid claims and claim adjustment
expenses at
the end of each year, net of reinsurance
losses
recoverable
5,014.2
4,246.3
Reinsurance
losses
recoverable
2,227.0
1,984.7
Gross
reserves at end of
year
$
$
7,241.3
$
6,231.1
2
*****
With this letter
Old Republic also acknowledges that:
·
The Company
is responsible for the adequacy and accuracy of the disclosure in the
above referenced filings;
·
Staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
·
The Company
may not assert the Commission staff’s comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United
States.
We trust that the
discussion above is responsive to the Commission’s comments. Please
feel free to contact me at (312) 762-4229 if you have any comments or
questions.
Very truly
yours,
/s/ Karl W.
Mueller
Karl W.
Mueller
Senior
Vice President and Chief Financial Officer
cc: A.C.
Zucaro
Chairman
and Chief Executive Officer
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