Old Republic’s third-quarter results were shaped by a one-off gain from its purchase of a Pennsylvania farm insurer, which offset weaker underwriting in its core specialty business.
The Chicago-based insurer reported net income of $243.2 million, down from $279.5 million a year earlier. The result included a $124.9 million bargain purchase gain on its acquisition of ECM Insurance Group, which closed on July 1. Excluding that gain and investment results, net operating income fell 7.8% to $181.4 million, or $0.73 per diluted share.
The consolidated combined ratio rose to 96.1% from 95.3%, as favorable reserve development shrank to 1.1 points from 2.5 points a year earlier.
The ECM deal is the most notable part of the quarter. Old Republic acquired Everett Cash Mutual, which specializes in small farmowners and commercial agricultural risks, through a sponsored demutualization. Under that structure, the Pennsylvania mutual converted to a stock company, and its eligible members were offered the chance to buy Old Republic shares at a discount in exchange for their membership interests.
Under accounting rules, a bargain purchase gain is recorded when a buyer pays less than the fair value of the net assets it acquires. When the deal was announced last year, Old Republic said ECM wrote $237 million in direct premium in 2024, operated in 48 states and the District of Columbia, and had statutory surplus of $126 million. Old Republic said ECM’s results added to operating earnings in its first quarter as part of the group.
For smaller mutuals, the deal shows another way to find a partner beyond mergers with other mutuals or reinsurance arrangements. For buyers, it offers access to established specialty books, and potentially at an attractive price.
Old Republic’s main specialty insurance business is less profitable than a year ago. Specialty underwriting income fell 15.4% in the quarter to $58.5 million and 41.3% over nine months. The segment’s nine-month combined ratio rose to 95.4% from 91.8%, close to the top of the company’s target range of 90% to 95%.
Reserve development is the key change. Favorable development in property, commercial auto and workers’ compensation was partly offset by adverse development in general liability and financial indemnity. Prior-year releases improved the specialty loss ratio by only 0.8 points, compared with 3.4 points a year earlier. The expense ratio also included a $20 million credit loss on a guaranteed asset protection (GAP) account.
Headline premium growth also needs some context. Specialty net premiums written rose 10.5%, but 7.1% excluding an accounting effect from auto warranty programs, which must record premium at the retail price of service contracts. Earned premium grew most in commercial auto, accident and health, property and auto warranty, while Canadian travel accident and trucking continued to shrink.
Title insurance was the bright spot. Pretax operating income rose 10.1% to $50.4 million, and the combined ratio improved to 96.1%. Agency premiums grew strongly, while direct premiums were flat because of interest rates. Old Republic said it aims to bring title back within its 90% to 95% target range soon.
Adverse development in general liability at a disciplined specialty carrier is another sign that casualty pressure hasn’t eased. Brokers placing GL and financial lines should expect underwriters to hold firm on rates and terms, even as other lines soften.
For agents in rural and agricultural markets, ECM’s move to a larger, well-capitalized owner could bring more capacity and stability for small farm and agribusiness accounts, an area where specialist markets are limited.
