Reasons to Add Old Republic (ORI) Stock to Your Kitty Now – September 5, 2022

Old Republic International Corporation’s (ORI Free Report) solid market presence, niche focus, low property catastrophe exposure in its General Insurance segment and robust capital position make it worth adding to one’s portfolio.

ORI has a decent track record of beating earnings estimates in three of the trailing four quarters, missing in one, the average being 15.15%.

ORI has a VGM Score of B.

Zacks Rank & Price Performance

Old Republic currently carries a Zacks Rank #2 (Buy). The stock has lost 10.6% year to date, compared with the industry’s decline of 7.7%.

Zacks Investment Research
Image Source: Zacks Investment Research

Northbound Estimate Revisions

The Zacks Consensus Estimate for 2022 has moved 4.3% north in the past 30 days, reflecting analysts’ optimism.

Return on Equity

Return on equity in the trailing 12 months was 14.2%, better than the industry average of 9.6%. This reflects ORI’s unique combination of specialty property and casualty and Title franchises that offers diversification.

Growth Drivers

Focus on organic growth, new ventures, strategic buyouts, new product offerings and new distribution channels should continue to drive revenues at General Insurance. Improved segmentation and risk selection, pricing precision as well as increased use of analytics should add to the upside. ORI aims for a combined ratio between 90 and 95 and an expense ratio below 25.

The Title insurance business will likely continue to benefit from an expanding presence in the commercial real estate market and increased digitalization apart from organic growth and prudent acquisitions.

ORI continues to strengthen its balance sheet by Improving cash balance while lowering its leverage ratio.

ORI has an impressive dividend history, banking on a solid capital position. The third-largest title insurer in the country increased dividends for 41 straight years and paid out dividends for the last 81 years, besides paying special dividends occasionally. Its dividend yield of 3.7% betters the industry average of 2%, making it an attractive pick for yield-seeking investors.

Recently, the board of directors approved a special, one-time cash dividend of $1 per share as well as a $450 million share buyback program. Old Republic boasts of being one of the 111 companies that have posted at least 25 consecutive years of annual dividend growth.

Attractive Valuation

ORI shares are trading at a discount than the industry average. Its price to book value of 1.06X is lower than the industry average of 2.19X. Before valuation expands, it is preferable to take a position in the stock. It has a Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offers better returns.

Stocks to Consider

Some other top-ranked stocks from the same space are Radian Group (RDN Free Report) , MGIC Investment Corporation (MTG Free Report) and The Hartford Financial Services Group (HIG Free Report) . While Radian sports a Zacks Rank #1, MGIC Investment and Hartford Financial carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for RDN’s 2022 earnings indicates a 32.7% year-over-year increase and has moved 16.1% north in the past 60 days. Radian Group has a trailing four-quarter earnings surprise of 29.51%, on average.

The Zacks Consensus Estimate for MTG’s 2022 earnings indicates a 33.9% year-over-year increase and has moved 10.9% north in the past 30 days. MGIC Investment has a trailing four-quarter earnings surprise of 22.25%, on average.

The Zacks Consensus Estimate for HIG’s 2022 earnings indicates a 17.2% year-over-year increase and has moved 0.8% north in the past 30 days. Hartford Financial has a trailing four-quarter earnings surprise of 34.08%, on average.

Shares of RDN, MTG and HIG have lost 2.9%, 3% and 5.9%, respectively, year to date.



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