ORI 10-Q Quarterly Report March 31, 2018

OLD REPUBLIC INTERNATIONAL CORP

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10-Q 1 a1q201810-q.htm OLD REPUBLIC INTERNATIONAL CORPORATION 1Q18 10-Q Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q



[x]	Quarterly report pursuant to section 13 or 15(d) of the Security Exchange Act of 1934
	for the quarterly period ended: March 31, 2018 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		No. 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

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: x No: o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: x No: o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 x	Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

	Smaller reporting company o

	Emerging growth company o

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: o No: x



Class		Shares Outstanding March 31, 2018
Common Stock / $1 par value		302,185,787

There are 51 pages in this report



OLD REPUBLIC INTERNATIONAL CORPORATION

Report on Form 10-Q / March 31, 2018

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 CASH FLOWS	6

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7 - 17

	MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS	18 - 47

	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	48

	CONTROLS AND PROCEDURES	48

PART II	OTHER INFORMATION:

	ITEM 1 - LEGAL PROCEEDINGS	49

	ITEM 1A - RISK FACTORS	49

	ITEM 6 - EXHIBITS	49

SIGNATURE		50

EXHIBIT INDEX		51



Old Republic International Corporation and Subsidiaries
Consolidated Balance Sheets
($ in Millions, Except Share Data)
	(Unaudited)
	March 31,			December 31,
	2018			2017
Assets
Investments:
Available for sale:
Fixed maturity securities (at fair value) (amortized cost: $8,136.8 and $8,162.2)	$	8,107.8		$	8,282.3
Short-term investments (at fair value which approximates cost)	474.9			670.1
Miscellaneous investments	30.0			29.1
Total	8,612.9			8,981.6
Held to maturity:
Fixed maturity securities (at amortized cost) (fair value: $1,038.0 and $1,069.2)	1,061.8			1,067.4
Equity securities (at fair value) (cost: $2,666.1 and $2,629.9)	3,149.7			3,265.5
Other investments	3.6			3.3
Total investments	12,828.2			13,318.0
Other Assets:
Cash	103.4			125.9
Securities and indebtedness of related parties	22.4			12.8
Accrued investment income	94.3			92.4
Accounts and notes receivable	1,516.1			1,469.7
Prepaid federal income taxes	114.3			114.3
Reinsurance balances and funds held	148.8			141.6
Reinsurance recoverable: Paid losses	70.9			60.5
Policy and claim reserves	3,330.9			3,311.3
Deferred policy acquisition costs	304.2			297.8
Sundry assets	464.7			458.8
Total Other Assets	6,170.6			6,085.5
Total Assets	$	18,998.8		$	19,403.5
Liabilities, Preferred Stock, and Common Shareholders' Equity
Liabilities:
Losses, claims, and settlement expenses	$	9,272.4		$	9,237.6
Unearned premiums	2,060.9			1,971.5
Other policyholders' benefits and funds	206.5			204.7
Total policy liabilities and accruals	11,540.0			11,413.9
Commissions, expenses, fees, and taxes	504.2			547.7
Reinsurance balances and funds	605.0			566.9
Federal income tax payable: Current	27.2			6.5
Deferred	33.4			100.5
Debt	974.1			1,448.7
Sundry liabilities	265.9			585.8
Commitments and contingent liabilities
Total Liabilities	13,950.2			14,670.2
Preferred Stock (1)	—			—
Common Shareholders' Equity:
Common stock (1)	302.1			269.2
Additional paid-in capital	1,267.9			815.2
Retained earnings	3,658.1			3,206.9
Accumulated other comprehensive income (loss)	(148.9		)	474.2
Unallocated ESSOP shares (at cost)	(30.6		)	(32.4		)
Total Common Shareholders' Equity	5,048.6			4,733.3
Total Liabilities, Preferred Stock and Common Shareholders' Equity	$	18,998.8		$	19,403.5

________

(1)

At March 31, 2018 and December 31, 2017 , 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 302,185,787 and 269,238,727 were issued as of March 31, 2018 and December 31, 2017 , respectively. At March 31, 2018 and December 31, 2017 , 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.



Old Republic International Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
($ in Millions, Except Share Data)
	Quarters Ended
	March 31,
	2018			2017
Revenues:
Net premiums earned	$	1,231.0		$	1,201.3
Title, escrow, and other fees	99.3			99.7
Total premiums and fees	1,330.4			1,301.0
Net investment income	105.8			101.2
Other income	30.6			27.6
Total operating revenues	1,466.8			1,429.9
Investment gains (losses):
Realized from actual transactions	15.5			14.8
Unrealized from change in fair value of
equity securities	(152.0		)	—
Impairments	—			—
Total realized and unrealized investment
gains (losses)	(136.4		)	14.8
Total revenues	1,330.4			1,444.8

Benefits, Claims and Expenses:
Benefits, claims and settlement expenses	590.1			559.2
Dividends to policyholders	3.8			4.1
Underwriting, acquisition, and other expenses	728.0			700.2
Interest and other charges	14.4			16.4
Total expenses	1,336.4			1,280.1
Income (loss) before income taxes (credits)	(6.0		)	164.7

Income Taxes (Credits):
Current	26.0			51.9
Deferred	(36.1		)	(.3		)
Total	(10.1		)	51.6

Net Income	$	4.0		$	113.1

Net Income Per Share:
Basic	$	.01		$	.43
Diluted	$	.01		$	.39

Average shares outstanding: Basic	278,116,902			260,784,905
Diluted	279,528,034			298,239,349

Dividends Per Common Share:
Cash	$	.1950		$	.1900

See accompanying Notes to Consolidated Financial Statements.



Old Republic International Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income ( Unaudited )
($ in Millions)
	Quarters Ended
	March 31,
	2018			2017
Net Income As Reported	$	4.0		$	113.1

Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized gains (losses) on securities before
reclassifications	(148.6		)	80.0
Amounts reclassified as investment gains
from sales in the statements of income	(.5		)	(14.8		)
Pretax unrealized gains (losses) on securities	(149.2		)	65.2
Deferred income taxes (credits)	(31.3		)	22.7
Net unrealized gains (losses) on securities, net of tax	(117.8		)	42.5
Defined benefit pension plans:
Net pension adjustment before reclassifications	—			—
Amounts reclassified as underwriting, acquisition,
and other expenses in the statements of income	.8			.1
Net adjustment related to defined benefit
pension plans	.8			.1
Deferred income taxes (credits)	.1			—
Net adjustment related to defined benefit pension
plans, net of tax	.6			—
Foreign currency translation and other adjustments	(3.7		)	1.5
Net adjustments	(120.9		)	44.1
Comprehensive Income (Loss)	$	(116.8	)	$	157.2

See accompanying Notes to Consolidated Financial Statements.



Old Republic International Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
($ in Millions)
	Quarters Ended
	March 31,
	2018			2017
Cash flows from operating activities:
Net income	$	4.0		$	113.1
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred policy acquisition costs	(6.4		)	(7.6		)
Premiums and other receivables	(46.4		)	(70.8		)
Unpaid claims and related items	65.1			24.4
Unearned premiums and other policyholders' liabilities	41.1			50.5
Income taxes	(15.0		)	56.5
Prepaid federal income taxes	—			(31.8		)
Reinsurance balances and funds	20.5			42.3
Realized investment (gains) losses from actual sale transactions	(15.5		)	(14.8		)
Unrealized investment (gains) losses from changes in fair value
of equity securities	152.0			—
Accounts payable, accrued expenses and other	(68.7		)	(15.6		)
Total	130.8			146.1

Cash flows from investing activities:
Fixed maturity securities:
Available for sale:
Maturities and early calls	196.8			139.8
Sales	144.0			107.9
Sales of:
Equity securities	81.2			40.3
Other - net	4.7			6.8
Purchases of:
Fixed maturity securities:
Available for sale	(324.9		)	(197.6		)
Held to maturity	—			(87.3		)
Equity securities	(103.1		)	(95.9		)
Other - net	(13.5		)	(13.6		)
Net decrease (increase) in short-term investments	195.1			27.2
Other - net	(1.5		)	—
Total	178.9			(72.3		)

Cash flows from financing activities:
Issuance of common shares	6.2			11.1
Redemption of debentures and notes	(4.7		)	(3.9		)
Dividends on common shares	(324.1		)	(49.3		)
Other - net	(9.5		)	—
Total	(332.2		)	(42.2		)

Increase (decrease) in cash	(22.5		)	31.5
Cash, beginning of period	125.9			145.7
Cash, end of period	$	103.4		$	177.2

Supplemental cash flow information:
Cash paid (received) during the period for: Interest	$	29.5		$	30.9
Income taxes	$	5.2		$	(5.0	)

See accompanying Notes to Consolidated Financial Statements.

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 2017 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 and are further discussed below.

Effective January 1, 2018, the Company adopted FASB guidance on the recognition and measurement of financial instruments. The impact of the Company’s adoption of this pronouncement and the related interim disclosure requirements have been included in the pertinent note herein.

In addition, effective January 1, 2018, the Company adopted the FASB's comprehensive revenue recognition standard which applies to all entities that have 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, does not have a material impact on the consolidated financial statements.

The Company recognized total contract revenue from customers of $40.7 and $37.7 for the period ended March 31, 2018 and 2017 , respectively. Of these amounts, approximately $26.7 ( 65.6% ) and $24.2 ( 64.2% ) were generated from claims handling and related ancillary services (i.e. risk control services) provided to customers within the Company’s General Insurance segment. Claims handling revenues are recognized on a straight-line basis over the contract period (generally one year) which is commensurate with the entity’s efforts relative to claims adjudication. The related ancillary services revenues are recognized as services are provided and invoiced to the customer. Additionally, revenues from contracts with customers generated from the Company’s Title Insurance segment, consisting primarily of valuation and default title services, and software licensing arrangements totaled $12.9 ( 31.7% ) and $12.5 ( 33.2% ) for the period ended March 31, 2018 and 2017 , respectively. Such revenues are generally recognized at a point in time upon completion and invoicing of the services, or in the case of software maintenance agreements, on a straight-line basis over the life of the contract (generally one year).

Furthermore, effective January 1, 2017, the Company adopted new FASB guidance on accounting for share-based payment award transactions. The Company’s adoption of this guidance did not have a material impact on the consolidated financial statements.

In February 2016, the FASB issued guidance on lease accounting which will be effective in 2019 and requires balance sheet recognition of all leases with a term greater than 12 months.

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 reinsurance recoverables, held to maturity securities, and accounts and notes receivable. The guidance also modifies the impairment model for available for sale fixed maturities securities.

The Company is currently evaluating the foregoing lease and credit loss 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 the results have been recorded for the interim periods. 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 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 and the number of shares used in basic and diluted earnings per share calculations.



	Quarters Ended
	March 31,
	2018		2017
Numerator:
Net income	$	4.0	$	113.1
Numerator for basic earnings per share -
income available to common stockholders	4.0		113.1
Adjustment for interest expense incurred on
assumed conversion of convertible notes	—		3.6
Numerator for diluted earnings per share -
income available to common stockholders
after assumed conversion of convertible notes	$	4.0	$	116.7

Denominator:
Denominator for basic earnings per share -
weighted-average shares (a)	278,116,902		260,784,905
Effect of dilutive securities - stock based
compensation awards	1,411,132		1,703,231
Effect of dilutive securities - convertible senior notes	—		35,751,213
Denominator for diluted earnings per share -
adjusted weighted-average shares
and assumed conversion of convertible notes (a)	279,528,034		298,239,349
Earnings per share: Basic	$	.01	$	.43
Diluted	$	.01	$	.39

Anti-dilutive common stock equivalents
excluded from earnings per share computations:
Stock based compensation awards	1,539,500		—
Convertible senior notes	21,773,776		—
Total	23,313,276		—

__________

(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 other common shares.

3. Investments:

The Company may classify its fixed maturity invested assets in terms of those assets relative to which 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. As of March 31, 2018 and December 31, 2017 , the majority of the Company's fixed maturity invested assets were classified as "available for sale."

Fixed maturity securities classified as "available for sale" are included at fair value with changes in such values, net of deferred income taxes, reflected directly in shareholders' equity while fixed maturity securities classified as "held to maturity" are carried at amortized cost. Effective January 1, 2018, preferred and common stocks (equity securities) are included at fair value with changes in such values reflected as 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 independent pricing services as applicable.

The Company reviews the status and fair value changes of each of its fixed maturity investments on at least a quarterly basis 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 audit opinion, 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 in shareholders' equity. The Company recognized no OTTI adjustments for the quarters ended March 31, 2018 and 2017 .

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:
March 31, 2018:
Available for sale:
U.S. & Canadian Governments	$	1,455.2	$	2.8	$	22.4	$	1,435.6
Corporate	6,681.6		66.7		76.1		6,672.1
	$	8,136.8	$	69.6	$	98.6	$	8,107.8

Held to maturity:
Tax-exempt	$	1,061.8	$	.8	$	24.6	$	1,038.0

December 31, 2017:
Available for sale:
U.S. & Canadian Governments	$	1,554.3	$	6.5	$	8.7	$	1,552.2
Corporate	6,607.8		140.8		18.6		6,730.0
	$	8,162.2	$	147.4	$	27.3	$	8,282.3

Held to maturity:
Tax-exempt	$	1,067.4	$	10.0	$	8.3	$	1,069.2



	Amortized Cost		Estimated Fair Value
Fixed Maturity Securities Stratified by Contractual Maturity at March 31, 2018:
Available for sale:
Due in one year or less	$	737.6	$	741.1
Due after one year through five years	4,296.1		4,295.3
Due after five years through ten years	3,000.9		2,963.8
Due after ten years	102.0		107.5
	$	8,136.8	$	8,107.8

Held to maturity:
Due in one year or less	$	—	$	—
Due after one year through five years	93.1		91.1
Due after five years through ten years	960.5		938.7
Due after ten years	8.1		8.1
	$	1,061.8	$	1,038.0

The following table reflects 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 securities have been in an unrealized loss position. Fair value and issuer's cost comparisons follow:



	12 Months or Less				Greater than 12 Months				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2018:

Fixed Maturity Securities:
U.S. & Canadian Governments	$	761.3	$	13.4	$	382.8	$	8.9	$	1,144.1	$	22.4
Tax-exempt	507.8		7.1		404.3		17.4		912.2		24.6
Corporate	2,992.9		53.5		664.0		22.6		3,657.0		76.1
Total	$	4,262.2	$	74.1	$	1,451.2	$	49.1	$	5,713.5	$	123.2

December 31, 2017:

Fixed Maturity Securities:
U.S. & Canadian Governments	$	1,080.9	$	8.6	$	29.5	$	—	$	1,110.5	$	8.7
Tax-exempt	321.9		4.8		134.7		3.4		456.6		8.3
Corporate	1,660.9		15.0		145.9		3.6		1,806.9		18.6
Subtotal	3,063.9		28.5		310.2		7.2		3,374.1		35.7
Equity Securities	354.0		23.2		—		—		354.0		23.2
Total	$	3,417.9	$	51.7	$	310.2	$	7.2	$	3,728.2	$	58.9

At March 31, 2018 , the Company held 1,296 fixed maturity securities in an unrealized loss position, representing 65.9% of the total number of such issues it held. At December 31, 2017 , the Company held 742 fixed maturity and 9 equity securities in an unrealized loss position, representing 37.6% (as to fixed maturities) and 9.5% (as to equity securities) of the total number of such issues it held. Of the securities in an unrealized loss position, 353 and 104 fixed maturity securities had been in a continuous unrealized loss position for more than 12 months as of March 31, 2018 and December 31, 2017 , respectively. The unrealized losses on these fixed income securities are primarily deemed to reflect changes in the interest rate environment. As part of its assessment of other-than-temporary impairments, the Company considers its intent to continue to hold, and the likelihood that it will not be required to sell investment securities in an unrealized loss position until cost recovery, principally on the basis of its asset and liability maturity matching procedures.

A summary of the Company's equity securities follows:



	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Equity Securities:
March 31, 2018	$	2,666.1	$	526.6	$	42.9	$	3,149.7
December 31, 2017	$	2,629.9	$	658.8	$	23.2	$	3,265.5

Effective January 1, 2018, the Company adopted a new accounting standard which requires the recognition of changes in fair value of equity securities in net income. The cumulative-effect adjustment resulting from the adoption of the new standard was to reclassify $502.1 from accumulated other comprehensive income to retained earnings; total shareholders' equity remained unchanged. During the first quarter 2018 , the Company recognized unrealized investment losses of $152.0 emanating from changes in the fair value of equity securities in the consolidated statements of income. Of this amount, $131.3 was related to changes in the fair value of equity securities still held at March 31, 2018 .

Fair Value Measurements - Fair value is defined as the estimated price that is likely to be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price) at the measurement date. A fair value hierarchy is established that prioritizes the sources ("inputs") used to measure fair value into three broad levels: inputs based on quoted market prices in active markets (Level 1); observable inputs based on corroboration with available market data (Level 2); and unobservable inputs based on uncorroborated market data or a reporting entity's own assumptions (Level 3). Following is a description of the valuation methodologies and general classification used for financial instruments measured at fair value.

The Company uses quoted values and other data provided by a nationally recognized independent pricing source as inputs into its quarterly process for determining fair values of its fixed maturity and equity securities. To validate the techniques or models used by pricing sources, the Company's review process includes, but is not limited to: (i) initial and ongoing evaluation of methodologies used by outside parties to calculate fair value; and (ii) comparing other sources including the fair value estimates to its knowledge of the current market and to independent fair value estimates provided by the investment custodian. The independent pricing source obtains market quotations and actual transaction prices for securities that have quoted prices in active markets and uses its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of "matrix pricing" in which the independent pricing source uses observable market inputs including, but not limited to, investment yields, credit risks and spreads, benchmarking of like securities, broker-dealer quotes, reported trades and sector groupings to determine a reasonable fair value.

Level 1 securities include U.S. and Canadian Treasury notes, publicly traded common stocks, the quoted net asset value ("NAV") mutual funds, and most short-term investments in highly liquid money market instruments. Level 2 securities generally include corporate bonds, municipal bonds, and certain U.S. and Canadian government agency securities. Securities classified within Level 3 include non-publicly traded bonds and equity securities. There were no significant changes in the fair value of assets measured with the use of significant unobservable inputs as of March 31, 2018 and December 31, 2017 .

The following tables show a summary of the fair value of financial assets segregated among the various input levels described above:



	Fair Value Measurements
As of March 31, 2018:	Level 1		Level 2		Level 3		Total
Available for sale:
Fixed maturity securities:
U.S. & Canadian Governments	$	645.7	$	789.9	$	—	$	1,435.6
Corporate	—		6,661.6		10.5		6,672.1
Short-term investments	474.9		—		—		474.9
Held to maturity:
Fixed maturity securities:
Tax-exempt	—		1,038.0		—		1,038.0
Equity securities	$	3,148.6	$	—	$	1.1	$	3,149.7

As of December 31, 2017:
Available for sale:
Fixed maturity securities:
U.S. & Canadian Governments	$	761.4	$	790.8	$	—	$	1,552.2
Corporate	—		6,719.5		10.5		6,730.0
Short-term investments	670.1		—		—		670.1
Held to maturity:
Fixed maturity securities:
Tax-exempt	—		1,069.2		—		1,069.2
Equity securities	$	3,264.4	$	—	$	1.1	$	3,265.5

There were no transfers between Levels 1, 2 or 3 during the quarter ended March 31, 2018 .

Investment income is reported net of allocated expenses and includes appropriate adjustments for amortization of premium and accretion of discount on fixed maturity securities acquired at other than par value. Dividends on equity securities are credited to income on the ex-dividend date.

Realized investment gains and losses, which result from sales or write-downs of securities are reflected as revenues in the income statement and are determined on the basis of amortized value at date of sale for fixed maturity securities, and cost in regard to equity securities; such bases apply to the specific securities sold. Also, effective January 1, 2018 , unrealized gains and (losses) from changes in fair value of equity securities are recorded as investment gains (losses) in the income statement. Unrealized investment gains and losses on fixed maturity securities, net of any deferred income taxes, are recorded directly as a component of accumulated other comprehensive income in shareholders' equity. At March 31, 2018 , the Company and its subsidiaries had no non-income producing fixed maturity securities.

The following table reflects the composition of net investment income, net realized gains or losses, and the net change in unrealized investment gains or losses for each of the periods shown.



	Quarters Ended
	March 31,
	2018			2017
Investment income from:
Fixed maturity securities	$	74.2		$	74.2
Equity securities	30.4			26.1
Short-term investments	1.9			.8
Other sources	.9			1.2
Gross investment income	107.5			102.4
Investment expenses (a)	1.7			1.1
Net investment income	$	105.8		$	101.2

Investment gains (losses):
From actual sale transactions:
Fixed maturity securities:
Gains	$	.4		$	2.8
Losses	(.1		)	(.1		)
Net	.2			2.6
Equity securities:
Gains	14.9			12.1
Losses	—			—
Net	14.9			12.1
Other long-term investments, net	.2			—
Total from actual sale transactions	15.5			14.8
From unrealized changes in fair value of equity securities	(152.0		)	—
From impairments	—			—
Total investment gains (losses)	(136.4		)	14.8
Income taxes (credits)	(28.7		)	5.1
Net investment gains (losses)	$	(107.7	)	$	9.6

Changes in unrealized investment gains (losses) on:
Fixed maturity securities	$	(148.7	)	$	17.0
Less: Deferred income taxes (credits)	(31.3		)	5.9
	(117.4		)	11.1

Equity securities & other long-term investments	(.4		)	48.1
Less: Deferred income taxes (credits)	—			16.7
	(.3		)	31.3
Net changes in unrealized investment gains (losses)	$	(117.8	)	$	42.5

__________


(a)	Investment expenses consist of personnel costs and investment management and custody service fees, as well as interest incurred on funds held of $.1 for both the quarters ended March 31, 2018 and 2017 .

4. Losses, Claims and Settlement Expenses:

The establishment of claim reserves by the Company's insurance subsidiaries is a reasonably complex and dynamic process influenced by a large variety of factors. These factors principally include past experience applicable to the anticipated costs of various types of claims, continually evolving and changing legal theories emanating from the judicial system, recurring accounting, statistical, and actuarial studies, the professional experience and expertise of the Company's claim departments' personnel or attorneys and independent claim adjusters, ongoing changes in claim frequency or severity patterns such as those caused by natural disasters, illnesses, accidents, work‑related injuries, and changes in general and industry-specific economic conditions. Consequently, the reserves established are a reflection of the opinions of a large number of persons, of the application and interpretation of historical precedent and trends, of expectations as to future developments, and of management's judgment in interpreting all such factors. At any point in time, the Company is exposed to the incurrence of possibly higher or lower than anticipated claim costs due to all of these factors, and to the evolution, interpretation, and expansion of tort law, as well as the effects of unexpected jury verdicts.

All reserves are therefore based on estimates which are periodically reviewed and evaluated in the light of emerging claim experience and changing circumstances. The resulting changes in estimates are recorded in operations of the periods during which they are made. Return and additional premiums and policyholders' dividends, all of which tend to be affected by development of claims in future years, may offset, in whole or in part, favorable or unfavorable claim developments for certain coverages such as workers' compensation, portions of which are written under loss sensitive programs that provide for such adjustments. The Company believes that its overall reserving practices have been

consistently applied over many years, and that its aggregate net reserves have generally resulted in reasonable approximations of the ultimate net costs of claims incurred. However, no representation is made nor is any guaranty given that ultimate net claim and related costs will not develop in future years to be greater or lower than currently established reserve estimates.

The Company’s accounting policy regarding the establishment of claim reserve estimates is described in Note 1(h) to the consolidated financial statements included in Old Republic’s 2017 Annual Report on 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 periods shown.



	Quarters Ended
	March 31,
	2018			2017
Gross reserves at beginning of period	$	9,237.6		$	9,206.0
Less: reinsurance losses recoverable	2,921.1			2,766.1
Net reserves at beginning of period:
General Insurance	5,471.5			5,249.9
Title Insurance	559.7			602.0
RFIG Run-off	271.7			574.0
Other	13.5			13.8
Sub-total	6,316.4			6,439.8
Incurred claims and claim adjustment expenses:
Provisions for insured events of the current year:
General Insurance	546.3			513.3
Title Insurance	21.1			21.3
RFIG Run-off (a)	18.7			32.8
Other	5.7			7.0
Sub-total	591.9			574.6
Change in provision for insured events of prior years:
General Insurance	15.9			10.1
Title Insurance	(8.2		)	(10.3		)
RFIG Run-off (a)	(7.2		)	(13.0		)
Other	(2.3		)	(1.8		)
Sub-total	(1.8		)	(15.1		)
Total incurred claims and claim adjustment expenses (a)	590.1			559.5
Payments:
Claims and claim adjustment expenses attributable to
insured events of the current year:
General Insurance	104.2			94.1
Title Insurance	.1			.2
RFIG Run-off (a)(b)	—			.2
Other	2.2			2.5
Sub-total	106.7			97.1
Claims and claim adjustment expenses attributable to
insured events of prior years:
General Insurance	368.0			367.5
Title Insurance	13.6			14.7
RFIG Run-off (b)	34.0			53.4
Other	2.4			2.2
Sub-total	418.1			437.8
Total payments (b)	524.8			535.0
Amount of reserves for unpaid claims and claim adjustment expenses
at the end of each period, net of reinsurance losses recoverable: (c)
General Insurance	5,561.5			5,311.7
Title Insurance	558.7			598.1
RFIG Run-off	249.1			540.2
Other	12.2			14.2
Sub-total	6,381.7			6,464.3
Reinsurance losses recoverable	2,890.7			2,766.9
Gross reserves at end of period	$	9,272.4		$	9,231.3

__________

(a)

In common with all other insurance coverages, RFIG Run-off mortgage guaranty settled and incurred claim and claim adjustment expenses include only those costs actually or expected to be paid by the Company. Changes in mortgage guaranty aggregate case, IBNR, and loss adjustment expense reserves shown below and entering into the determination of incurred claim costs, take into account, among a large number of variables, claim cost reductions for anticipated coverage rescissions and claims denials.

The RFIG Run-off mortgage guaranty provision for insured events of the current year was reduced by estimated coverage rescissions and claims denials of $1.2 and $1.7 for the year-to-date periods ended March 31, 2018 and 2017 , respectively. The provision for insured events of prior years for the periods shown in the table was (increased) reduced by estimated coverage rescissions and claims denials of $(2.1) and $(1.6) , respectively. Prior year development was also affected in varying degrees by differences between actual claim settlements relative to expected experience, by reinstatement of previously rescinded or denied claims, and by subsequent revisions of assumptions in regards to claim frequency, severity or levels of associated claim settlement costs which result from consideration of underlying trends and expectations.


(b)	Rescissions reduced the Company's paid losses by an estimated $1.4 and $3.0 for the year-to-date periods ended March 31, 2018 and 2017 , respectively.


(c)	Net reserves for claims that have been incurred but are not yet reported ("IBNR") carried in each segment were as follows:




	March 31,		March 31,		December 31,
	2018		2017		2017
General Insurance	$	2,686.9	$	2,515.3	$	2,585.9
Title Insurance	478.0		521.5		479.3
RFIG Run-off	30.0		208.6		30.5
Other	4.7		5.0		4.7
Total	$	3,199.8	$	3,250.6	$	3,100.6

5. Employee Benefit Plans:

The Company had an active pension plan (the "Plan") covering a portion of its work force until December 31, 2013 . The Plan is a defined benefit plan pursuant to which pension payments are based primarily on years of service and employee compensation near retirement. The Plan was closed to new participants and benefits were frozen as of December 31, 2013 . As a result, eligible employees retained all of the vested rights as of the effective date of the freeze. While additional benefits no longer accrue, the Company's cumulative obligation continues to be subject to further adjustment due to changes in actuarial assumptions such as expected mortality and changes in interest rates. Net periodic pension costs for the quarterly periods ended March 31, 2018 and 2017 were not material to Old Republic's consolidated statements of income.

6. Information About Segments of Business:

Old Republic is engaged in the single business of insurance underwriting and related services. The Company conducts its operations through a number of regulated insurance company subsidiaries organized into three major segments, namely its General Insurance Group (property and liability insurance), Title Insurance Group, and the Republic Financial Indemnity Group ("RFIG") Run-off Business. The results of a small life & accident insurance business are included with those of its holding company parent and minor corporate services operations. Each of the Company's segments underwrites and services only those insurance coverages which may be written by it pursuant to state insurance regulations and corporate charter provisions. Segment results exclude investment gains or losses and other-than-temporary impairments as these are aggregated in the consolidated totals. The contributions of Old Republic's insurance industry segments to consolidated totals are shown in the following table.



	Quarters Ended
	March 31,
	2018		2017
General Insurance:
Net premiums earned	$	791.2	$	742.8
Net investment income and other income	113.5		106.2
Total revenues before investment gains or losses	$	904.8	$	849.0
Income before income taxes (credits) and investment
gains or losses (a)	$	83.3	$	93.7
Income tax expense (credits) on above	$	11.5	$	28.0

Title Insurance:
Net premiums earned	$	414.5	$	418.3
Title, escrow and other fees	99.3		99.7
Sub-total	513.8		518.0
Net investment income and other income	9.7		9.7
Total revenues before investment gains or losses	$	523.6	$	527.8
Income before income taxes (credits) and investment
gains or losses (a)	$	29.5	$	40.4
Income tax expense (credits) on above	$	6.3	$	13.8

RFIG Run-off Business:
Net premiums earned	$	21.3	$	35.5
Net investment income and other income	5.3		5.5
Total revenues before investment gains or losses	$	26.7	$	41.1
Income before income taxes (credits) and investment
gains or losses	$	10.9	$	14.5
Income tax expense (credits) on above	$	2.2	$	5.2



Consolidated Revenues:
Total revenues of above Company segments	$	1,455.2		$	1,418.0
Other sources (b)	41.4			41.9
Consolidated investment gains (losses):
Realized from actual transactions	15.5			14.8
Unrealized from changes in fair value of equity securities	(152.0		)	—
Total realized and unrealized investment gains (losses)	(136.4		)	14.8
Consolidation elimination adjustments	(29.7		)	(29.9		)
Consolidated revenues	$	1,330.4		$	1,444.8

Consolidated Income (Loss) Before Income
Taxes (Credits):
Total income before income taxes (credits)
and investment gains or losses of
above Company segments	$	123.8		$	148.7
Other sources - net (b)	6.5			1.1
Consolidated investment gains (losses):
Realized from actual transactions	15.5			14.8
Unrealized from changes in fair value of equity securities	(152.0		)	—
Total realized and unrealized investment gains (losses)	(136.4		)	14.8
Consolidated income (loss) before income
taxes (credits)	$	(6.0	)	$	164.7

Consolidated Income Tax Expense (Credits):
Total income tax expense (credits)
for above Company segments	$	20.1		$	47.1
Other sources - net (b)	(1.5		)	(.7		)
Income tax expense (credits) on consolidated
investment gains (losses)	(28.7		)	5.1
Consolidated income tax expense (credits)	$	(10.1	)	$	51.6



	March 31,			December 31,
	2018			2017
Consolidated Assets:
General Insurance	$	16,015.8		$	16,055.5
Title Insurance	1,401.5			1,466.0
RFIG Run-off Business	777.3			805.0
Total assets for the above company segments	18,194.8			18,326.6
Other assets (b)	1,109.9			1,440.9
Consolidation elimination adjustments	(305.9		)	(364.0		)
Consolidated assets	$	18,998.8		$	19,403.5

__________


(a)	Income before income taxes (credits) is reported net of interest charges on intercompany financing arrangements with Old Republic's holding company parent for the following segments: General - $15.4 and $14.1 for the quarters ended March 31, 2018 and 2017 , respectively, and Title - $1.4 and $2.1 for the quarters ended March 31, 2018 and 2017 , respectively.


(b)	Represents amounts for Old Republic's holding company parent, minor corporate services subsidiaries, and a small life and accident insurance operation.

7. Commitments and Contingent Liabilities:

Legal proceedings against the Company and its subsidiaries routinely arise in the normal course of business and usually pertain to claim matters related to insurance policies and contracts issued by its insurance subsidiaries. Under GAAP, an estimated loss is accrued only if the loss is probable and reasonably estimable. At March 31, 2018 , the Company did not have material non-claim litigation exposures in its consolidated business for which adequate claim and related expense provisions had not been made.

8. Debt:

Consolidated debt of Old Republic and its subsidiaries is summarized below:



	March 31, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
3.75% Convertible Senior Notes due 2018	$	—	$	—	$	470.6	$	652.2
4.875% Senior Notes due 2024	396.3		422.5		396.2		430.3
3.875% Senior Notes due 2026	545.3		541.4		545.1		553.9
ESSOP debt	—		—		4.2		4.2
Other miscellaneous debt with an average yield of 2.97%
and 2.45%, respectively	32.4		32.5		32.4		32.5
Total debt	$	974.1	$	996.5	$	1,448.7	$	1,673.2

During the first quarter 2018 , the Company's outstanding aggregate principal amount of the 3.75% Convertible Senior Notes were converted into 32,229,787 shares of Old Republic common stock.

On August 26, 2016 , the Company completed a public offering of $550.0 aggregate principal amount of Senior Notes. The notes bear interest at a rate of 3.875% per year and mature on August 26, 2026 .

On September 23, 2014 , the Company completed a public offering of $400.0 aggregate principal amount of Senior Notes. The notes bear interest at a rate of 4.875% per year and mature on October 1, 2024 .

Fair Value Measurements - The Company utilizes indicative market prices, which incorporate recent actual market transactions and current bid/ask quotations to estimate the fair value of outstanding debt securities that are classified within Level 2 of the fair value hierarchy as presented below. The Company uses an internally generated interest yield market matrix table, which incorporates maturity, coupon rate, credit quality, structure and current market conditions to estimate the fair value of its outstanding debt securities that are classified within Level 3.

The following table shows a summary of the carrying value and fair value of financial liabilities segregated among the various input levels described in Note 3 above:



	Carrying		Fair
	Value		Value		Level 1		Level 2		Level 3
Financial Liabilities:
Debt:
March 31, 2018	$	974.1	$	996.5	$	—	$	964.0	$	32.5
December 31, 2017	$	1,448.7	$	1,673.2	$	—	$	1,636.5	$	36.7

9. Income Taxes:

Tax positions taken or expected to be taken in a tax return by the Company are recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. To the best of management's knowledge, there are no tax uncertainties that are expected to result in significant increases or decreases to unrecognized tax benefits within the next twelve month period. The Company views its income tax exposures as primarily consisting of timing differences whereby the ultimate deductibility of a taxable amount is highly certain but the timing of its deductibility is uncertain. Such differences relate principally to the timing of deductions for loss and premium reserves. As in prior examinations, the Internal Revenue Service ("IRS") could assert that claim reserve deductions were overstated thereby reducing the Company's statutory taxable income in any particular year. The Company believes that it establishes its reserves fairly and consistently at each balance sheet date, and that it would succeed in defending its tax position in these regards. Because of the impact of deferred tax accounting, the possible accelerated payment of tax to the IRS would not necessarily affect the annual effective tax rate. The Company classifies interest and penalties as income tax expense in the consolidated statement of income. The IRS has audited the Company's consolidated Federal income tax returns through year-end 2013.

The Tax Cuts and Jobs Act ("TCJA") was enacted into law on December 22, 2017. The TCJA, among its many elements, lowered the nominal federal corporate tax rate to 21.0% from 35.0% . The Internal Revenue Service ("IRS") requires the Company's insurance subsidiaries to discount loss reserves using either company specific payment patterns, or industry average tables published by the IRS. The Company has previously elected to follow the IRS industry average tables. The TCJA requires the IRS to publish tables linking the interest rates used to discount loss reserves to the corporate bond yield curve as opposed to the Federal mid-term rates used under the old law. As of the date of this report, the IRS has not published the updated tables. Accordingly, the Company is unable to make a reasonable estimate of any adjustment resulting from the application of the new IRS published discount rates. The Company has used the most recently published IRS tables for the preparation of the accompanying consolidated financial statements. Any adjustment to the loss reserve discount will be recorded in the period in which additional information becomes available.

OLD REPUBLIC INTERNATIONAL CORPORATION

MANAGEMENT ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS

Quarters Ended March 31, 2018 and 2017

($ in Millions, Except Share Data)

OVERVIEW

This management analysis of financial position and results of operations pertains to the consolidated accounts of Old Republic International Corporation ("Old Republic", "ORI", or "the Company"). The Company conducts its operations principally through three major regulatory segments, namely, its General (property and liability), Title, and the RFIG (mortgage guaranty and consumer credit indemnity) Run-off Business. A small life and accident insurance business, accounting for .3% of consolidated operating revenues for the quarter ended March 31, 2018 and .8% of consolidated assets as of that date, is included within the corporate and other caption of this report.

The consolidated accounts are presented 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"). As a publicly held company, Old Republic utilizes GAAP largely to comply with the financial reporting requirements of the Securities and Exchange Commission ("SEC"). From time to time the FASB and the SEC issue various releases, many of which require additional financial statement disclosures and provide related application guidance. Recent guidance issued by the FASB is summarized further in Note 1 of the Notes to Consolidated Financial Statements.

As a state regulated financial institution vested with the public interest, however, business of the Company's insurance subsidiaries is managed pursuant to the laws, regulations, and accounting practices of the various states in the U.S. and those of a small number of other jurisdictions outside the U.S. in which they operate. In comparison with GAAP, the statutory accounting practices reflect greater conservatism and comparability among insurers, and are intended to address the primary financial security interests of policyholders and their beneficiaries. Additionally, these practices also affect a significant number of important factors such as product pricing, risk bearing capacity and capital adequacy, the determination of Federal income taxes payable currently among ORI's tax-consolidated entities, and the upstreaming of dividends by insurance subsidiaries to the parent holding company. The major differences between these statutory financial accounting practices and GAAP are summarized in Note 1(a) to the consolidated financial statements included in Old Republic's 2017 Annual Report on Form 10-K.

The insurance business is distinguished from most others in that the prices (premiums) charged for various insurance products are set without certainty of the ultimate benefit and claim costs that will emerge, often many years after issuance and expiration of a policy. This basic fact casts Old Republic as a risk-taking enterprise managed for the long run. Management therefore conducts the business with a primary focus on achieving favorable underwriting results over cycles, and on the maintenance of financial soundness in support of the insurance subsidiaries' long-term obligations to policyholders and their beneficiaries. To achieve these objectives, adherence to insurance risk management principles is stressed, and asset diversification and quality are emphasized.

In addition to income arising from Old Republic's basic underwriting and related services functions, significant investment income is earned from invested funds generated by those functions and from capital resources. Investment management aims for stability of income from interest and dividends, protection of capital, and for sufficiency of liquidity to meet insurance underwriting and other obligations as they become payable in the future. Securities trading and the realization of capital gains are not objectives. The investment philosophy is therefore best characterized as emphasizing value, credit quality, and relatively long-term holding periods. The Company's ability to hold both fixed maturity and equity securities for long periods of time is in turn enabled by the scheduling of maturities in contemplation of an appropriate matching of assets and liabilities, and by investments in large capitalization, highly liquid equity securities.

In light of the above factors, the Company's affairs are managed for the long run and without significant regard to the arbitrary strictures of quarterly or even annual reporting periods that American industry must observe. In Old Republic's view, such short reporting time frames do not comport well with the long-term nature of much of its business. Management therefore believes that the Company's operating results and financial condition can best be evaluated by observing underwriting and overall operating performance trends over succeeding five- or preferably ten-year intervals. A ten-year period in particular can likely encompass at least one economic and/or underwriting cycle and thereby provide an appropriate time frame for such cycle to run its course, and for premium rate changes and reserved claim costs to be quantified and emerge in financial results with greater finality and effect.

This management analysis should be read in conjunction with the consolidated financial statements and the footnotes appended to them.

EXECUTIVE SUMMARY

Old Republic International Corporation reported the operating and net income amounts shown in the following table. Pretax operating income dropped across most segments in this year’s first quarter. On the other hand, post-tax operating income rose as it benefitted from lower corporate income tax rates. Net income was affected by the same factor, as well as the inclusion of unrealized fair-value investment gains (losses) on equity securities for the first time beginning in 2018. As a consequence, year-over-year post-tax operating and net income are not fully comparable among the periods reported upon. The table following the Financial Highlights shows the impact of these factors on period-to-period comparisons.



Financial Highlights
	Quarters Ended March 31,
	2018			2017		Change
Operating revenues:
General insurance	$	904.8		$	849.0	6.6	%
Title insurance		523.6			527.8	(.8	)
Corporate and other		11.6			11.9	(2.2	)
Subtotal		1,440.1			1,388.8	3.7
RFIG run-off business		26.7			41.1	(35.0	)
Total	$	1,466.8		$	1,429.9	2.6	%
Pretax operating income (loss):
General insurance	$	83.3		$	93.7	(11.1	)%
Title insurance		29.5			40.4	(27.0	)
Corporate and other		6.5			1.1	N/M
Subtotal		119.4			135.3	(11.8	)
RFIG run-off business		10.9			14.5	(24.2	)
Total		130.4			149.8	(13.0	)
Pretax investment gains (losses):
Realized from actual transactions		15.5			14.8	4.7
Unrealized from changes in fair
value of equity securities		(152.0	)		—	N/A
Total realized and unrealized
investment gains (losses)		(136.4	)		14.8	N/M
Consolidated pretax income (loss)		(6.0	)		164.7	(103.7	)
Income taxes (credits)		(10.1	)		51.6	(119.7	)
Net income (loss)	$	4.0		$	113.1	(96.4	)%
Components of post-tax diluted
earnings per share:
Net operating income (loss):
General insurance	$	0.26		$	0.22	18.2	%
Title insurance		0.08			0.09	(11.1	)
Corporate and other		0.03			0.02	50.0
Subtotal		0.37			0.33	12.1
RFIG run-off business		0.03			0.03	—
Net operating income (loss)		0.40			0.36	11.1
Net realized investment gains (losses)
from actual sale transactions		0.04			0.03	33.3
Subtotal		0.44			0.39	12.8
Net unrealized investment gains
(losses) from changes in fair
value of equity securities		(0.43	)		—	N/A
Net income (loss)	$	0.01		$	0.39	(97.4	)%
Cash dividends declared per share	$	0.1950		$	0.1900	2.6	%
Ending book value per share	$	16.82		$	17.58	(4.3	)%

__________________

N/M = Not meaningful / N/A = Not applicable

Effective January 1, 2018, two significant events have occurred that have a bearing on the reporting of consolidated pretax income, as well as post-tax net operating and net income. The first arises from a new rule of the Financial Accounting Standards Board (“FASB”) which requires the inclusion of unrealized investment gains or losses emanating from changes in the fair value of equity (but not fixed maturity) securities in the determination of pre and post-tax net income. The second emanates from a reduction of nominal Federal corporate income tax rates from 35% to 21%.

To enhance a comparison of reported earnings among the periods reported upon, the following table shows the resulting effective income tax rates and the inclusion of changes in fair value of equity securities in 2017 results as if the new rule applied to that year.



	Quarters Ended March 31,
	2018			2017			Change

Pretax operating income	$	130.4		$	149.8		(13.0	)%
Income tax expense (effective rates 14.3% and 31.0%)(a)		18.5			46.4		(59.9	)
Net operating income		111.8			103.4		8.1
Realized investment gains (losses) from actual sale transactions		15.5			14.8		4.7
Income tax expense (effective rates 21.0% and 35.0%)(a)		3.2			5.1		(37.2	)
Net realized investment gains (losses)		12.2			9.6		27.3
Combined pretax operating income and realized investment gains (losses)		145.9			164.7		(11.4	)
Income tax expense (effective rates 15.0% and 31.3%)(a)		21.8			51.6		(57.6	)
Combined net operating income and realized investment gains
(losses)		124.0			113.1		9.7	%
Unrealized gains (losses) from changes in fair value of equity securities		(152.0	)		47.9	(b)
Income tax expense (effective rates 21.0% and 35.0%)(a)		(32.0	)		16.7	(b)
Net unrealized gains (losses)		(120.0	)		31.2	(b)
Consolidated pretax income (loss)		(6.0	)		212.7	(b)
Income tax expense (effective rates N/M and 32.1%)(a)		(10.1	)		68.3	(b)
Net income (loss)	$	4.0		$	144.3	(b)

__________________

(a) Effective rates based on 2018 (21%) and 2017 (35%) nominal Federal income tax rates, respectively.

(b) Amounts for 2017 include the retroactive, “as if” addition of equity securities unrealized gains or losses for that period.

The above and preceding table show both net operating and net income to highlight the effects of realized and, beginning in 2018, certain unrealized investment gains or losses on period-to-period comparisons. Management uses operating income, a non-GAAP financial measure, to evaluate and better explain operating performance, believing that the measure enhances an understanding of Old Republic’s core business results. Net operating income, however, does not replace GAAP net income as a measure of total profitability.

The realization of investment gains or losses can be highly discretionary due to such factors as the timing of individual securities sales, the recording of estimated losses from write-downs of impaired securities, tax-planning and tax-rate change considerations, as well as modifications in investment management judgments regarding the direction of securities markets or the future prospects of individual investees or industry sectors. The inclusion, beginning in 2018 of market-driven changes in equity investments’ valuations will likely produce, as it has most assuredly done in this year’s first three months, greater period-to-period fluctuations in reported net income particularly at times of significant instability or volatility in the securities markets. This FASB change, however, has no effect on management or evaluation of the Company’s operating results, nor on the determination of such critical elements as current income taxes, debt-to-equity ratios, shareholders’ equity, or its insurance subsidiaries’ ability to pay dividends to the ORI parent company.

General Insurance Results - The table below shows the major elements affecting this segment’s performance for the periods reported upon.



	General Insurance Group
	Quarters Ended March 31,
	2018		2017		Change
Net premiums earned	$	791.2	$	742.8	6.5	%
Net investment income		83.2		78.8	5.5
Other income		30.3		27.3	11.0
Operating revenues		904.8		849.0	6.6
Claim costs		566.1		527.6	7.3
Sales and general expenses		238.3		211.9	12.5
Interest and other costs		17.0		15.6	8.7
Total operating expenses		821.4		755.3	8.8
Pretax operating income (loss)(a)	$	83.3	$	93.7	(11.1	)%



Claim ratio	71.5	%	71.0	%
Expense ratio	26.3		24.9
Composite underwriting ratio	97.8	%	95.9	%

__________________

(a)

In connection with the run-off mortgage guaranty ("MI") and consumer credit indemnity ("CCI") combination, $0.4 and $(4.5) of pretax operating gains (losses) for the first quarter 2018 and 2017, respectively, were retained by certain general insurance companies pursuant to various quota share and stop loss reinsurance agreements. All of these amounts, however, have been reclassified such that 100% of the CCI run-off business is reported in the RFIG run-off segment.

With few exceptions, earned premiums grew for most types of coverages and markets served. The aggregating effects of recent years’ rate increases along with new business production are main elements in the higher premium levels. Net investment income gained from the combination of a moderately larger invested asset base and uptrend in dividend income.

Claim costs were affected by better performance in workers compensation and commercial automobile (trucking) coverages. Poorer results for the relatively small and volatile general liability coverage and several other types of insurance, however, offset that better performance. For all coverages combined, current periods’ improving claim ratios were dampened by unfavorable developments of prior years’ reserves. These amounted to 2.0 and 1.4 percentage points in the first quarter of 2018 and 2017, respectively. The table below shows recent annual and quarterly trends in prior years’ developments:



		Effect of Prior Years'
		(Favorable)/	Claim Ratio Excluding Prior
		Unfavorable Claim	Years' Claim Reserves
	Reported Claim Ratio	Reserves Development	Development
2013	73.6%	(0.9)%	74.5%
2014	77.9	3.9	74.0
2015	74.1	1.5	72.6
2016	73.0	0.3	72.7
2017	71.8%	0.7%	71.1%
1st Quarter 2017	71.0%	1.4%	69.6%
1st Quarter 2018	71.5%	2.0%	69.5%

2018’s expense ratio increased nearly 6% to 26.3%. This was largely caused by different production cost structures effecting some faster growing coverages in this year’s first quarter.

Quarterly and even annual claim provisions and the trends they display may not be particularly meaningful in Old Republic’s liability insurance oriented mix of business. Absent significant economic and insurance industry dislocations in the foreseeable future, it is anticipated that reported claim ratios can be expected to fall within targeted averages in the high 60 percent to low 70 percent range. The current mix of business should result in the expense ratio ranging between 23 percent and 25 percent.

Title Insurance Results - First quarter 2018 operating results were mostly affected by basically flat revenues, and higher claim costs and general expenses.



	Title Insurance Group
	Quarters Ended March 31,
	2018		2017		Change
Net premiums and fees earned	$	513.8	$	518.0	(0.8	)%
Net investment income		9.4		9.5	(0.4	)
Other income		0.2		0.2	1.9
Operating revenues		523.6		527.8	(0.8	)
Claim costs		12.9		11.0	17.4
Sales and general expenses		479.8		474.0	1.2
Interest and other costs		1.2		2.2	(41.8	)
Total operating expenses		494.0		487.3	1.4
Pretax operating income (loss)	$	29.5	$	40.4	(27.0	)%



Claim ratio	2.5	%	2.1	%
Expense ratio	93.3		91.5
Composite underwriting ratio	95.8	%	93.6	%

Year-over-year comparisons of revenues from title premiums and fees reflected relatively flat volume reported by independent agents, and a small decline for directly-produced business. By contrast, claim costs rose 17.4% in this year’s first quarter due primarily to lower favorable development of prior years’ claim reserves in the first quarter of 2018. The following table shows recent trends in reported claim ratios, and the impact on each calendar period of (favorable) or unfavorable developments of prior years’ claim reserve provisions:



		Effect of Prior Years'
		(Favorable)/	Claim Ratio Excluding Prior
		Unfavorable Claim	Years' Claim Reserves
	Reported Claim Ratio	Reserves Development	Development
2013	6.7%	(0.2)%	6.9%
2014	5.2	(0.8)	6.0
2015	4.9	(0.6)	5.5
2016	3.8	(1.1)	4.9
2017	0.9%	(3.3)%	4.2%
1st Quarter 2017	2.1%	(2.0)%	4.1%
1st Quarter 2018	2.5%	(1.6)%	4.1%

The expense ratio to premiums and fees rose to 93.3% in this year’s first quarter compared to 91.5% in the same period of 2017. The higher costs related mostly to rising salaries and associated benefits expenses.

RFIG Run-off Business Results - First quarter results were largely effected by the continuing decline of risk in force and concomitant drop in earned premiums.



	RFIG Run-off Business
	Quarters Ended March 31,
	2018		2017		Change
A. Mortgage Insurance (MI)
Net premiums earned	$	20.9	$	31.3	(33.1	)%
Net investment income		5.1		5.2	(2.1	)
Claim costs		11.4		10.9	4.8
Pretax operating income (loss)(a)	$	10.7	$	19.3	(44.4	)%



Claim ratio	54.8	%	35.0	%
Expense ratio	18.3		19.9
Composite underwriting ratio	73.1	%	54.9	%



B. Consumer Credit Indemnity (CCI)
Net premiums earned	$	0.4	$	4.2		(90.2	)%
Net investment income		0.2		0.3		(32.4	)
Claim costs		—		8.8		(100.1	)
Pretax operating income (loss)(a)	$	0.2	$	(4.8	)	104.1	%



Claim ratio	(3.0	)%	209.2	%
Expense ratio	107.4		13.9
Composite underwriting ratio	104.4	%	223.1	%



C. Total MI and CCI run-off business:
Net premiums earned	$	21.3	$	35.5	(39.9	)%
Net investment income		5.3		5.5	(3.9	)
Claim costs		11.4		19.8	(42.1	)
Pretax operating income (loss)(a)	$	10.9	$	14.5	(24.2	)%



Claim ratio	53.7	%	55.7	%
Expense ratio	20.0		19.2
Composite underwriting ratio	73.7	%	74.9	%

__________________

(a)

Operating results of the run-off MI and CCI businesses were largely affected by a 39.9% drop in net earned premiums. As noted above, the reduction in MI earned premiums reflected the continuing decline in risk in force. For the CCI coverage, the much lower premiums in this year’s first quarter resulted from the elimination of a major bank as a source of significant premiums and claims. MI claim costs rose disproportionately to earned premiums in both quarterly periods. The indicated claim ratios (54.8% in 2018 and 35.0% in 2017) reflect reductions of 27.6 and 34.9 percentage points, respectively, due to favorable developments of prior years’ reserves.

Corporate and Other Operations - The combination of a small life and accident insurance business and the net costs associated with operations of the parent holding company and its internal services subsidiaries usually produce highly variable results. Earnings variations posted by these elements of Old Republic's business stem from volatility inherent to the small scale of the life and accident insurance line, net investment income, and net interest charges pertaining to external and intra-system financing arrangements. The interplay of these various operating elements is summarized in the following table:



	Corporate and Other Operations
	Quarters Ended March 31,
	2018		2017
Net premiums earned	$	3.9	$	4.6
Net investment income		7.7		7.2
Other income		—		—
Operating revenues		11.6		11.9
Claim costs		3.4		5.0
Insurance expenses		1.3		3.8
Corporate, interest, and other expenses-net		0.3		1.8
Total operating expenses		5.1		10.8
Pretax operating income (loss)	$	6.5	$	1.1

Consolidated Results - The above summarized operating results of Old Republic’s segmented business are reflected in the following consolidation of accounts.



	ORI Consolidated
	Quarters Ended March 31,
	2018			2017		Change
Net premiums and fees earned	$	1,330.4		$	1,301.0	2.3	%
Net investment income		105.8			101.2	4.5
Other income		30.6			27.6	10.8
Operating revenues		1,466.8			1,429.9	2.6
Claim costs		594.0			563.4	5.4
Sales and general expenses		728.0			700.2	4.0
Interest and other costs		14.4			16.4	(12.3	)
Total operating expenses		1,336.4			1,280.1	4.4
Pretax operating income (loss)		130.4			149.8	(13.0	)
Income taxes (credits)		18.5			46.4	(59.9	)
Net operating income (loss)		111.8			103.4	8.1
Realized investment gains (losses)
from actual sale transactions		15.5			14.8	4.7
Income tax expense (credits)		3.2			5.1	(37.2	)
Net realized investment
gains (losses)		12.2			9.6	27.3
Unrealized investment gains (losses)
from changes in fair value of
equity securities		(152.0	)		—	N/A
Income tax expense (credits)		(32.0	)		—	N/A
Net unrealized investment
gains (losses)		(120.0	)		—	N/A
Net realized and unrealized
investment gains (losses)		(107.7	)		9.6	N/M
Net income (loss)	$	4.0		$	113.1	(96.4	)%



Claim ratio	44.6	%	43.3	%
Expense ratio	52.1		51.4
Composite underwriting ratio	96.7	%	94.7	%



Consolidated operating cash flow	$	130.8	$	146.1	(10.5	)%

Consolidated operating cash flow was additive to investable funds and operating needs in the amount of $130.8 and $146.1 for the first three months of 2018 and 2017, respectively. Excluding inherently negative operating cash flows in the RFIG run-off business, these amounts would have been $142.2 and $193.1, respectively.

The sum-total of Old Republic's segmented results is represented by the following major components of pretax consolidated income:



	Quarters Ended March 31,
	2018			2017			Change
Pretax operating income:
Underwriting and related services:
All segments except RFIG	$	33.3		$	56.0		(40.6	)%
RFIG run-off		5.6			8.9		(37.0	)
Subtotal		38.9			65.0		(40.1	)
Net investment income		105.8			101.2		4.5
Interest and other costs		(14.4	)		(16.4	)	(12.3	)
Total		130.4			149.8		(13.0	)
Realized investment gains (losses)
from actual sale transactions		15.5			14.8		4.7
Unrealized investment gains (losses)
from changes in fair value of
equity securities		(152.0	)		—		N/A
Consolidated pretax income (loss)	$	(6.0	)	$	164.7		(103.7	)%

Cash, Invested Assets, and Shareholders' Equity - The table below shows Old Republic's consolidated cash and invested assets as well as the shareholders' equity balance at the dates shown.



				Cash, Invested Assets, and Shareholders' Equity
										% Change
				March 31,		Dec. 31,		March 31,		March '18 /		March '18 /
				2018		2017		2017		Dec. '17		March '17
Cash and invested assets:
	Invested assets, carried at fair value			$	11,964.1	$	12,468.9	$	12,110.6	(4.0	)%	(1.2	)%
	Held to maturity, carried at amortized cost			1,061.8		1,067.4		1,056.9		(0.5	)	0.5
	Total per balance sheet			$	13,026.0	$	13,536.4	$	13,167.5	(3.8	)%	(1.1	)%
	Total at original cost of all			$	12,574.2	$	12,783.4	$	12,466.8	(1.6	)%	0.9	%

Shareholders' equity: Total				$	5,048.6	$	4,733.3	$	4,585.6	6.7	%	10.1	%
			Per common share	$	16.82	$	17.72	$	17.58	(5.1	)%	(4.3	)%

Composition of shareholders' equity per share:
	Equity before items below			$	16.05	$	16.26	$	16.17	(1.3	)%	(0.7	)%
	Unrealized investment gains (losses) and other
		accumulated comprehensive income (loss)		0.77		1.46		1.41		N/M		N/M
			Total	$	16.82	$	17.72	$	17.58	(5.1	)%	(4.3	)%

Segmented composition of
shareholders' equity per share:
	Excluding run-off segment			$	15.41	$	16.14	$	16.26	(4.5	)%	(5.2	)%
	RFIG run-off segment			1.41		1.58		1.32		(10.8	)	6.8
			Consolidated total	$	16.82	$	17.72	$	17.58	(5.1	)%	(4.3	)%

Old Republic's invested assets are directed in consideration of enterprise-wide risk management objectives. Most importantly, these are intended to ensure solid funding of the insurance subsidiaries' long-term obligations to policyholders and other beneficiaries, as well as the long-term stability of the subsidiaries’ capital accounts. To this end, the investment portfolio contains no significant insurance risk-correlated asset exposures to real estate, mortgage-backed securities, collateralized debt obligations ("CDO's"), derivatives, hybrid securities, or illiquid private equity and hedge fund investments. Moreover, the Company does not engage in hedging or securities lending transactions, nor does it invest in securities whose values are predicated on non-regulated financial instruments exhibiting amorphous or unfunded counter-party risk attributes.

As of March 31, 2018, the consolidated investment portfolio reflected an allocation of approximately 75% to fixed-maturity and short-term investments, and 25% to equities. Investments in high quality, dividend-paying equity securities have been singularly emphasized since 2013. The asset quality of the fixed maturity portfolio has remained at high levels.

Changes in shareholders' equity per share are reflected in the following table. As shown, these resulted mostly from net income, dividend payments to shareholders, and changes in the value of invested assets carried at fair value.



	Shareholders' Equity Per Share
	Quarters Ended March 31,
	2018			2017
Beginning balance	$	17.72		$	17.16
Changes in shareholders' equity:
Post-tax net operating income (loss)		0.40			0.40
Post-tax net realized investment gains (losses)		0.04			0.03
Post-tax net unrealized investment gains (losses) on
securities carried at fair value:
Reported in net income (loss)		(0.43	)		—
Reported as other comprehensive income (loss)		(0.39	)		0.16
Subtotal		(0.82	)		0.16
Total post-tax realized and unrealized
investment gains (losses)		(0.78	)		0.19
Cash dividends		(0.1950	)		(0.1900	)
Debt conversion, stock issuance, and other transactions		(0.33	)		0.02
Net change		(0.90	)		0.42
Ending balance	$	16.82		$	17.58
Percentage change for the period		(5.1	)%		2.4	%

Capitalization - The following table shows the components of total capitalization. The most significant change for the twelve months ended March 31, 2018 relates to the conversion of all of the convertible senior notes due 2018 into the Company’s common stock.



	Capitalization
	March 31,			December 31,			March 31,
	2018			2017			2017
Debt:
3.75% Convertible Senior Notes due 2018	$	—		$	470.6		$	548.2
4.875% Senior Notes due 2024		396.3			396.2			395.8
3.875% Senior Notes due 2026		545.3			545.1			544.7
ESSOP debt		—			4.2			4.2
Other miscellaneous debt with an average yield of 3.0%		32.4			32.4			32.4
Total debt		974.1			1,448.7			1,525.5
Common shareholders' equity		5,048.6			4,733.3			4,585.6
Total capitalization	$	6,022.7		$	6,182.0		$	6,111.1

Capitalization ratios:
Debt		16.2	%		23.4	%		25.0	%
Common shareholders' equity		83.8			76.6			75.0
Total		100.0	%		100.0	%		100.0	%

DETAILED MANAGEMENT ANALYSIS

This section of the Management Analysis of Financial Position and Results of Operations is additive to and should be read in conjunction with the Executive Summary which precedes it.

FINANCIAL ACCOUNTING AND REPORTING POLICIES

The Company's annual and interim financial statements incorporate a large number and types of estimates relative to matters which are highly uncertain at the time the estimates are made. The estimation process required of an insurance enterprise as Old Republic is by its very nature highly dynamic inasmuch as it necessitates a continuous evaluation, analysis, and quantification of factual data as it becomes known to the Company. As a result, actual experienced outcomes can differ from the estimates made at any point in time and thus affect future periods' reported revenues, expenses, net income or loss, and financial condition.

Old Republic believes that its most critical accounting estimates relate to: a) the determination of other-than-temporary impairments ("OTTI") in the value of fixed maturity investments; b) the valuation of deferred income tax assets; c) the establishment and recoverability of deferred acquisition costs; d) the recoverability of reinsured paid and/or outstanding losses; and e) the establishment of reserves for losses and loss adjustment expenses. The major assumptions and methods used in setting these estimates are discussed in the Company's 2017 Annual Report on Form 10-K.

FINANCIAL POSITION

The Company's financial position at March 31, 2018 reflected declines in assets and liabilities of 2.1% and 4.9% , respectively, and an increase in common shareholders' equity of 6.7% when compared to the immediately preceding year-end. Cash and invested assets represented 68.6% and 69.8% of consolidated assets as of March 31, 2018 and December 31, 2017 , respectively. As of March 31, 2018 , the cash, accrued investment income, and invested asset base declined by 3.8% to $13,026.0 .

Investments - During the first quarter of 2018 and 2017 , the Company committed the majority of investable funds to short to intermediate-term fixed maturity securities and higher yielding publicly traded large capitalization common shares. At both March 31, 2018 and 2017 , approximately 99% of the Company's investments consisted of marketable securities. Old Republic continues to adhere to its long-term policy of investing primarily in investment grade, marketable securities. The investment portfolio contains no significant insurance risk-correlated asset exposures to real estate, mortgage-backed securities, collateralized debt obligations ("CDO's"), derivatives, hybrid securities, or illiquid private equity and hedge fund investments. Moreover, the Company does not engage in hedging or securities lending transactions, nor does it invest in securities whose values are predicated on non-regulated financial instruments exhibiting amorphous or unfunded counter-party risk attributes. At March 31, 2018 , the Company had no fixed maturity investments in default as to principal and/or interest.

Short-term maturity investment positions reflect a large variety of seasonal and intermediate-term factors including current operating needs, expected operating cash flows, seasonality of quarterly cash flow, debt maturities, and investment strategy considerations. Accordingly, the future level of short-term investments will vary and respond to the interplay of these factors and may, as a result, increase or decrease from current levels.

The Company does not own or utilize derivative financial instruments for the purpose of hedging, enhancing the overall return of its investment portfolio, or reducing the cost of its debt obligations. With regard to its equity portfolio, the Company does not own any options nor does it engage in any type of option writing. Traditional investment management tools and techniques are employed to address the yield and valuation exposures of the invested assets base. The long-term fixed maturity investment portfolio is managed so as to limit various risks inherent in the bond market. Credit risk is addressed through asset diversification and the purchase of investment grade securities. Reinvestment rate risk is reduced by concentrating on non-callable issues, and by taking asset-liability matching considerations into account. Purchases of mortgage and asset backed securities, which have variable principal prepayment options, are generally avoided. Market value risk is limited through the purchase of bonds of intermediate maturity. The combination of these investment management practices is expected to produce a more stable long-term fixed maturity investment portfolio that is not subject to extreme interest rate sensitivity and principal deterioration.

The fair value of the Company's long-term fixed maturity investment portfolio is sensitive, however, to fluctuations in the level of interest rates, but not materially affected by changes in anticipated cash flows caused by any prepayments. The impact of interest rate movements on the long-term fixed maturity investment portfolio generally affects net unrealized gains or losses. As a general rule, rising interest rates enhance currently available yields but typically lead to a reduction in the fair value of existing fixed maturity investments. By contrast, a decline in such rates reduces currently available yields but usually serves to increase the fair value of the existing fixed maturity investment portfolio. All such changes in fair value of available for sale securities are reflected, net of deferred income taxes, directly in the shareholders' equity account, and as a separate component of the statement of comprehensive income. Fixed maturity securities classified as held to maturity are carried at amortized cost, and therefore, fluctuations in unrealized gains and losses do not impact shareholders' equity. Given the Company's inability to forecast or control the movement of interest rates, Old Republic sets the maturity spectrum of its fixed maturity securities portfolio within parameters of estimated liability payouts, and focuses the overall portfolio on high quality investments. By so doing, Old Republic believes it is reasonably assured of its ability to hold securities to maturity as it may deem necessary in changing environments, and of ultimately recovering their aggregate cost.

Possible future declines in fair values for Old Republic's available for sale bond portfolio would negatively affect the common shareholders' equity account at any point in time, but would not necessarily result in the recognition of realized investment losses. The Company reviews the status and fair value changes of each of its fixed maturity investments on at least a quarterly basis during the year, and estimates of other-than-temporary impairments in the portfolio's value are evaluated and established at each quarterly balance sheet date. In reviewing investments for other-than-temporary impairment, 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 audit opinion, 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 other-than-temporary impairments is insufficient at any point in time, future periods' net income (loss) would be affected adversely by the recognition of additional impairment losses, but its financial condition would not necessarily be affected adversely inasmuch as such losses, or a portion of them, could have been recognized previously as unrealized losses in shareholders' equity.

The following tables show certain information relating to the Company's fixed maturity and equity portfolios as of the dates shown:



Credit Quality Ratings of Fixed Maturity Securities (a)

	March 31,		December 31,
	2018		2017
Aaa	20.7	%	21.6	%
Aa	13.3		12.9
A	32.2		31.8
Baa	27.6		27.5
Total investment grade	93.8		93.8
All other (b)	6.2		6.2
Total	100.0	%	100.0	%

__________


(a)	Credit quality ratings referred to herein are a blend of those assigned by the major credit rating agencies for U.S. and Canadian Governments, Agencies, Corporates and Municipal issuers, which are converted to the above ratings classifications.


(b)	"All other" includes non-investment grade or non-rated issuers.



Gross Unrealized Losses Stratified by Industry Concentration for Non-Investment Grade Fixed Maturity Securities

March 31, 2018			Amortized Cost			Gross Unrealized Losses
Fixed Maturity Securities by Industry Concentration:
	Energy		$	154.5		$	5.1
	Basic Industry		20.7			.9
	Health Care		26.3			.6
	Consumer Non Durable		23.6			.3
	Other (includes 6 industry groups)		92.2			1.2
		Total	$	317.4	(c)	$	8.2

__________


(c)	Represents 3.5% of the total fixed maturity securities portfolio.



Gross Unrealized Losses Stratified by Industry Concentration for Investment Grade Fixed Maturity Securities

March 31, 2018			Amortized Cost			Gross Unrealized Losses
Fixed Maturity Securities by Industry Concentration:
	Municipal		$	936.9		$	24.6
	U.S. Governments & Agencies		1,085.2			20.8
	Utilities		753.1			17.0
	Industrial		443.2			9.5
	Other (includes 16 industry groups)		2,300.6			42.9
		Total	$	5,519.3	(d)	$	114.9

__________


(d)	Represents 60.0% of the total fixed maturity securities portfolio.



Gross Unrealized Losses Stratified by Industry Concentration for Equity Securities

March 31, 2018			Cost			Gross Unrealized Losses
Equity Securities by Industry Concentration:
	Utilities		$	144.3		$	14.1
	Energy		110.9			12.1
	Consumer Non Durable		87.8			9.3
	Health Care		66.7			6.6
	Other (includes 3 industry groups)		78.6			.7
		Total	$	488.6	(e)	$	42.9	(f)

__________


(e)	Represents 18.3% of the total equity securities portfolio.


(f)	Represents 1.6% of the cost of the total equity securities portfolio, while gross unrealized gains represent 19.8% of the portfolio.



Gross Unrealized Losses Stratified by Maturity Ranges for All Fixed Maturity Securities

		Amortized Cost of Fixed Maturity Securities				Gross Unrealized Losses
March 31, 2018		All		Non- Investment Grade Only		All		Non- Investment Grade Only
Maturity Ranges:
Due in one year or less		$	290.7	$	5.0	$	.8	$	—
Due after one year through five years		2,508.8		171.5		43.2		4.0
Due after five years through ten years		3,006.1		132.3		78.5		3.9
Due after ten years		31.0		8.5		.6		.2
	Total	$	5,836.8	$	317.4	$	123.2	$	8.2



Gross Unrealized Losses Stratified by Duration and Amount of Unrealized Losses

			Amount of Gross Unrealized Losses
March 31, 2018			Less than 20% of Cost		20% to 50% of Cost		More than 50% of Cost		Total Gross Unrealized Loss
Number of Months in Loss Position:

Fixed Maturity Securities:
	One to six months		$	68.7	$	—	$	—	$	68.7
	Seven to twelve months		5.4		—		—		5.4
	More than twelve months		49.1		—		—		49.1
		Total	$	123.2	$	—	$	—	$	123.2

Number of Issues in Loss Position:

Fixed Maturity Securities:
	One to six months		872		—		—		872
	Seven to twelve months		71		—		—		71
	More than twelve months		353		—		—		353
		Total	1,296		—		—		1,296		(g)

__________


(g)	At March 31, 2018 the number of issues in an unrealized loss position represent 65.9% of the total number of such fixed maturity issues held by the Company.

The aging of issues with unrealized losses employs balance sheet date fair value comparisons with an issue's amortized cost. The percentage reduction from such cost reflects the decline as of a specific point in time ( March 31, 2018 in the above table) and, accordingly, is not indicative of a security's value having been consistently below its cost at the percentages shown nor throughout the periods shown.



Age Distribution of Fixed Maturity Securities

			March 31,		December 31,
			2018		2017
Maturity Ranges:
	Due in one year or less		8.0	%	9.2	%
	Due after one year through five years		47.7		45.5
	Due after five years through ten years		43.1		44.1
	Due after ten years through fifteen years		1.0		1.0
	Due after fifteen years		.2		.2
		Total	100.0	%	100.0	%

Average Maturity in Years			4.7		4.7
Duration (h)			4.2		4.2

___________


(h)	Duration is used as a measure of bond price sensitivity to interest rate changes. A duration of 4.2 as of March 31, 2018 implies that a 100 basis point parallel increase in interest rates from current levels would result in a possible decline in the fair value of the long-term fixed maturity investment portfolio of approximately 4.2%.



Composition of Unrealized Gains (Losses)

			March 31,				December 31,
			2018				2017
Available for Sale:
Fixed Maturity Securities:
	Amortized cost		$	8,136.8			$	8,162.2
	Estimated fair value		8,107.8				8,282.3
	Gross unrealized gains		69.6				147.4
	Gross unrealized losses		(98.6		)		(27.3		)
		Net unrealized gains (losses)	$	(29.0	)		$	120.0

Equity Securities:
	Original cost		$	2,666.1			$	2,629.9
	Estimated fair value		3,149.7				3,265.5
	Gross unrealized gains		526.6				658.8
	Gross unrealized losses		(42.9		)		(23.2		)
		Net unrealized gains (losses)	$	483.6		(i)	$	635.6

___________


(i)	Effective January 1, 2018 , changes in fair value of equity securities are recognized in net income. See Note 3.

Other Assets - Among other major assets, substantially all of the Company's receivables are not past due. Reinsurance recoverable balances on paid or estimated unpaid losses are deemed recoverable from solvent reinsurers or have otherwise been reduced by allowances for estimated amounts unrecoverable. Deferred policy acquisition costs are estimated by taking into account the direct costs relating to the successful acquisition of new or renewal insurance contracts and evaluating their recoverability on the basis of recent trends in claims costs. The Company's deferred policy acquisition cost balances have not fluctuated substantially from period-to-period, and do not represent significant percentages of assets or shareholders' equity.

Liquidity - The parent holding company meets its liquidity and capital needs principally through dividends and interest on intercompany financing arrangements paid by its subsidiaries. The insurance subsidiaries' ability to pay cash dividends to the parent company is generally restricted by law or subject to approval of the insurance regulatory authorities of the states in which they are domiciled. The Company can receive up to $554.6 in dividends from its subsidiaries in 2018 without the prior approval of regulatory authorities. The liquidity achievable through such permitted dividend payments is considered sufficient to cover the parent holding company's currently expected cash outflows represented mostly by interest and scheduled repayments on outstanding debt, reasonably anticipated cash dividend payments to shareholders, modest operating expenses, and the near-term capital needs of its operating company subsidiaries.

Capitalization - Old Republic's total capitalization of $6,022.7 at March 31, 2018 consisted of debt of $974.1 and common shareholders' equity of $5,048.6 . Changes in the common shareholders' equity account reflect primarily net income for the period then ended, changes in the fair value of fixed maturity securities, dividend payments and the conversion of all the 2018 Convertible Senior Notes into the Company's common stock. At March 31, 2018 , the Company's consolidated debt to equity ratio was 19.3% .

Old Republic has paid cash dividends to its shareholders without interruption since 1942, and has increased the annual rate in each of the past 37 calendar years. The dividend rate is reviewed and approved by the Board of Directors on a quarterly basis each year. In establishing each year's cash dividend rate the Company does not follow a strict formulaic approach. Rather, it favors a gradual rise in the annual dividend rate that is largely reflective of long-term consolidated operating earnings trends. Accordingly, each year's dividend rate is set judgmentally in consideration of such key factors as the dividend paying capacity of the Company's insurance subsidiaries, the trends in average annual statutory and GAAP earnings for the five to ten most recent calendar years, and management's long-term expectations for the Company's consolidated business and its individual operating subsidiaries.

Under state insurance regulations, the Company's three mortgage guaranty insurance subsidiaries are required to operate at a maximum risk to capital ratio of 25:1 or otherwise hold minimum amounts of capital based on specified formulas. The Company's mortgage insurance subsidiaries have discontinued writing new business in all states and limited themselves to servicing the run-off of their existing business. Risk-to-capital ratio considerations are therefore no longer of consequence.

RESULTS OF OPERATIONS

Revenues: Premiums & Fees

Pursuant to GAAP applicable to the insurance industry, revenues are recognized as follows:

Substantially all general insurance premiums pertain to annual policies and are reflected in income on a pro-rata basis in association with the related benefits, claims and expenses. Earned but unbilled premiums are generally taken into income on the billing date, while adjustments for retrospective premiums, commissions and similar charges or credits are accrued on the basis of periodic evaluations of current underwriting experience and contractual obligations.

Title premium and fee revenues stemming from the Company's direct operations (which include branch offices of its title insurers and wholly owned agency subsidiaries) represent approximately 25% of 2018 consolidated title business revenues. Such premiums are generally recognized as income at the escrow closing date which approximates the policy effective date. Fee income related to escrow and other closing services is recognized when the related services have been performed and completed. The remaining 75% of consolidated title premium and fee revenues is produced by independent title agents and underwritten title companies. Rather than making estimates that could be subject to significant variance from actual premium and fee production, the Company recognizes revenues from those sources upon receipt. Such receipts can reflect a three to four month lag relative to the effective date of the underlying title policy, and are offset concurrently by production expenses and claim reserve provisions.

The Company's mortgage guaranty premiums primarily stem from monthly installments paid on long-duration, guaranteed renewable insurance policies. Such premiums are written and earned in the month coverage is effective. With respect to relatively few annual or single premium policies, earned premiums are largely recognized on a pro-rata basis over the terms of the policies. As described more fully in the RFIG Run-off Business' Risk Factors for premium income and long-term claim exposures in the Company's 2017 Annual Report on Form 10-K under Item 1A - Risk Factors, revenue recognition for insured loans is not appropriately matched to the risk exposure and the consequent recognition of both normal and catastrophic loss occurrences.

The major sources of Old Republic's consolidated earned premiums and fees for the periods shown were as follows:



	Earned Premiums and Fees
	General		Title		RFIG Run-off		Other		Total		% Change from prior period
Years Ended December 31:
2015	$	2,894.7	$	2,045.3	$	219.9	$	19.4	$	5,179.4	7.7	%
2016	2,936.3		2,206.6		170.0		20.1		5,333.2		3.0
2017	3,110.8		2,287.2		122.9		18.8		5,539.7		3.9
Quarters Ended March 31:
2017	742.8		518.0		35.5		4.6		1,301.0		4.4
2018	$	791.2	$	513.8	$	21.3	$	3.9	$	1,330.4	2.3	%

The percentage allocation of net premiums earned for major insurance coverages in the General Insurance Group was as follows:



	General Insurance Earned Premiums by Type of Coverage
	Workers' Compensation		Commercial Automobile (mostly trucking)		Financial Indemnity		Inland Marine and Property		General Liability		Other
Years Ended December 31:
2015	39.0	%	32.1	%	4.1	%	7.4	%	5.9	%	11.5	%
2016	36.5		33.7		4.3		7.4		5.6		12.5
2017	33.6		34.6		4.9		7.6		6.3		13.0
Quarters Ended March 31:
2017	35.6		33.9		4.7		7.3		6.2		12.3
2018	32.4	%	36.1	%	5.3	%	7.7	%	6.4	%	12.1	%

The following table shows the percentage distribution of Title Group premium and fee revenues by production sources:



Title Premium and Fee Production by Source
	Direct Operations		Independent Title Agents & Other
Years Ended December 31:
2015	27.2	%	72.8	%
2016	27.9		72.1
2017	26.9		73.1
Quarters Ended March 31:
2017	25.6		74.4
2018	25.2	%	74.8	%

The following tables provide information on production and related risk exposure trends for Old Republic's mortgage guaranty insurance operation:



	Earned Premiums				Persistency
Premium and Persistency Trends by Type:	Direct		Net		Traditional Primary		Bulk
Years Ended December 31:
2015	$	201.1	$	195.9	79.9	%	56.1	%
2016	157.1		154.1		77.7		72.8
2017	110.4		109.8		77.9		78.2
Quarters Ended March 31:
2017	31.4		31.3		77.7		73.3
2018	$	20.9	$	20.9	78.0	%	74.8	%

As previously discussed, the Company's flagship mortgage guaranty insurance carrier ceased the underwriting of new policies effective August 31, 2011 and the existing book of business was placed in run-off operating mode.

While there is no consensus in the marketplace as to the precise definition of "sub-prime", Old Republic generally views loans with credit (FICO) scores less than 620, loans underwritten with reduced levels of documentation and loans with loan to value ratios in excess of 95% as having a higher risk of default. Risk in force concentrations by these attributes are disclosed in the following tables for both traditional primary and bulk production. Premium rates for loans exhibiting greater risk attributes are typically higher in anticipation of potentially greater defaults and claim costs. Additionally, bulk insurance policies, which represent 6.8% of total net risk in force as of March 31, 2018 , are frequently subject to deductibles and aggregate stop losses which serve to limit the overall risk on a pool of insured loans.



Net Risk in Force
Net Risk in Force By Type:	Traditional Primary		Bulk		Other		Total
As of December 31:
2015	$	6,414.9	$	428.2	$	24.1	$	6,867.3
2016	4,987.9		359.5		20.5		5,367.9
2017	3,888.0		292.4		12.1		4,192.6
As of March 31:
2017	4,715.6		344.8		20.1		5,080.7
2018	$	3,683.2	$	271.3	$	11.5	$	3,966.2



Analysis of Risk in Force
Risk in Force Distribution By FICO Scores:	FICO less than 620		FICO 620 to 680		FICO Greater than 680		Unscored/ Unavailable

Traditional Primary:
As of December 31:
2015	6.8	%	29.3	%	63.0	%	.9	%
2016	7.2		30.5		61.5		.8
2017	7.5		31.5		60.2		.8
As of March 31:
2017	7.2		30.7		61.2		.9
2018	7.6	%	31.7	%	60.0	%	.7	%

Bulk(a):
As of December 31:
2015	28.4	%	32.2	%	39.2	%	.2	%
2016	29.9		32.0		38.0		.1
2017	31.8		31.7		36.3		.2
As of March 31:
2017	30.3		32.0		37.5		.2
2018	32.6	%	31.5	%	35.7	%	.2	%



Risk in Force Distribution By Loan to Value ("LTV") Ratio:	LTV 85.0 and below		LTV 85.01 to 90.0		LTV 90.01 to 95.0		LTV Greater than 95.0

Traditional Primary(b):
As of December 31:
2015	3.8	%	33.5	%	30.9	%	31.8	%
2016	3.8		32.1		30.6		33.5
2017	4.0		30.9		30.5		34.6
As of March 31:
2017	3.9		31.8		30.6		33.7
2018	4.0	%	30.6	%	30.4	%	35.0	%

Bulk(a):
As of December 31:
2015	48.3	%	28.0	%	11.9	%	11.8	%
2016	46.5		29.0		12.3		12.2
2017	45.3		29.9		12.6		12.2
As of March 31:
2017	46.3		29.0		12.6		12.1
2018	44.3	%	30.6	%	12.6	%	12.5	%

__________


(a)	Bulk pool risk in-force, which represented 9.4% of total bulk risk in-force at March 31, 2018 has been allocated pro-rata based on insurance in-force.


(b)	The LTV distribution reflects base LTV ratios which are determined prior to the impact of single premiums financed and paid at the time of loan origination.

Risk in Force Distribution By Top Ten States:



			Traditional Primary
	TX		FL		GA		IL		CA		NC		PA		NJ		VA		MD
As of December 31:
2015	7.1	%	7.5	%	5.9	%	5.5	%	4.9	%	4.7	%	4.3	%	4.2	%	3.4	%	3.4	%
2016	6.4		7.8		6.0		5.8		4.8		4.6		4.4		4.4		3.6		3.8
2017	5.9		8.1		6.0		6.1		4.8		4.4		4.3		4.6		3.7		4.2
As of March 31:
2017	6.2		7.8		6.0		5.9		4.8		4.5		4.3		4.5		3.6		3.9
2018	5.8	%	8.2	%	6.0	%	6.2	%	4.8	%	4.4	%	4.3	%	4.6	%	3.8	%	4.3	%



			Bulk (a)
	TX		FL		GA		IL		CA		AZ		PA		NJ		OH		NY
As of December 31:
2015	5.1	%	8.9	%	4.7	%	4.0	%	12.8	%	2.8	%	3.6	%	4.4	%	4.2	%	7.4	%
2016	5.3		8.6		4.9		4.2		12.4		2.9		3.7		4.1		4.2		7.4
2017	5.4		8.3		5.1		4.4		12.4		3.0		3.8		3.4		4.4		7.8
As of March 31:
2017	5.3		8.6		5.0		4.2		12.5		2.9		3.7		4.0		4.3		7.5
2018	5.5	%	8.1	%	5.3	%	4.4	%	12.6	%	2.9	%	3.8	%	3.3	%	4.5	%	7.2	%



Risk in Force Distribution By Level of Documentation:	Full Documentation		Reduced Documentation
Traditional Primary:
As of December 31:
2015	92.6	%	7.4	%
2016	92.4		7.6
2017	92.3		7.7
As of March 31:
2017	92.3		7.7
2018	92.2	%	7.8	%

Bulk (a):
As of December 31:
2015	66.6	%	33.4	%
2016	68.0		32.0
2017	69.4		30.6
As of March 31:
2017	68.1		31.9
2018	71.3	%	28.7	%

__________


(a)	Bulk pool risk in-force, which represented 9.4% of total bulk risk in-force at March 31, 2018 , has been allocated pro-rata based on insurance in-force.



Risk in Force Distribution By Loan Type:	Fixed Rate & ARMs with Resets >=5 Years		ARMs with Resets <5 years
Traditional Primary:
As of December 31:
2015	97.3	%	2.7	%
2016	97.2		2.8
2017	97.2		2.8
As of March 31:
2017	97.2		2.8
2018	97.2	%	2.8	%

Bulk (a):
As of December 31:
2015	71.8	%	28.2	%
2016	71.3		28.7
2017	70.1		29.9
As of March 31:
2017	70.9		29.1
2018	69.4	%	30.6	%

__________


(a)	Bulk pool risk in-force, which represented 9.4% of total bulk risk in-force at March 31, 2018 , has been allocated pro-rata based on insurance in-force.

The Company's consumer credit indemnity ("CCI") earned premiums and related risk in force included in the table below have reflected a generally declining trend. The decline is largely due to a discontinuation of active sales efforts since 2008 and from the elimination of a major bank as a source of significant premiums and claims in the third quarter of 2017. The following table shows CCI net premiums earned during the indicated periods and the maximum calculated risk in force at the end of the respective periods. Net earned premiums include additional premium adjustments arising from the variable claim experience of individual policies subject to retrospective rating plans. Risk in force reflects estimates of the maximum risk exposures at the inception of individual policies adjusted for cumulative claim costs and the lower outstanding loan balances attributed to such policies through the end of the periods shown below.



	Net CCI Earned Premiums		Risk in Force
Years Ended December 31:
2015	$	23.9	$	776.9
2016	15.8		699.7
2017	13.0		140.9
Quarters Ended March 31:
2017	4.2		679.6
2018	$	.4	$	133.8

Revenues: Net Investment Income

Net investment income is affected by trends in interest and dividend yields for the types of securities in which the Company's funds are invested during each reporting period. The following tables reflect the segmented and consolidated invested asset bases as of the indicated dates, and the investment income earned and resulting yields on such assets. Since the Company can exercise little control over fair values, yields are evaluated on the basis of investment income earned in relation to the cost of the underlying invested assets, though yields based on the fair values of such assets are also shown in the statistics below.



	Invested Assets at Cost										Fair Value Adjust- ment		Invested Assets at Fair Value (a)
	General		Title		RFIG Run-off		Corporate and Other		Total		Fair Value Adjust- ment		Invested Assets at Fair Value (a)
As of December 31:
2016	$	9,255.8	$	1,100.2	$	685.3	$	1,073.6	$	12,115.1	$	642.5	$	12,757.7
2017	9,702.7		1,106.2		545.9		1,206.9		12,561.9		756.1		13,318.0
As of March 31:
2017	9,328.7		1,111.3		635.7		1,110.7		12,186.5		707.8		12,894.4
2018	$	9,849.2	$	1,085.6	$	529.4	$	909.2	$	12,373.6	$	454.5	$	12,828.2

__________

(a) These balances include fixed maturity securities classified as held to maturity which are reported and reflected herein at amortized cost.



	Net Investment Income										Yield at
	General		Title		RFIG Run-off		Corporate and Other		Total		Cost		Fair Value
Years Ended
December 31:
2015	$	312.1	$	34.0	$	25.1	$	17.2	$	388.6	3.61	%	3.49	%
2016	312.1		36.2		23.2		15.4		387.0		3.34		3.23
2017	318.9		37.3		21.7		31.4		409.4		3.32		3.14
Quarters Ended
March 31:
2017	78.8		9.5		5.5		7.2		101.2		3.33		3.16
2018	$	83.2	$	9.4	$	5.3	$	7.7	$	105.8	3.39	%	3.24	%

Revenues: Net Investment Gains (Losses)

The Company's investment policies are not designed to maximize or emphasize the realization of investment gains. Rather, these policies aim for a stable source of income from interest and dividends, protection of capital, and the providing of sufficient liquidity to meet insurance underwriting and other obligations as they become payable in the future. Dispositions of fixed maturity securities generally arise from scheduled maturities and early calls; for the first quarter of 2018 and 2017 , 57.7% and 56.4% , respectively, of all such dispositions resulted from these occurrences. Dispositions of securities at a realized gain or loss reflect such factors as ongoing assessments of issuers' business prospects, allocation to industry sectors, changes in credit quality, and tax planning considerations. Effective January 1, 2018, unrealized gains and losses from changes in fair value of equity securities are also included as revenues and in pretax income. The combination of all realized investment gains or losses and unrealized investment gains or losses on equity securities can cause variances in period-to-period results, which in the Company's view, are not indicative of any particular trend or result in the basics of its insurance business.

The following table reflects the composition of net investment gains or losses for the periods shown.



	Realized Investment Gains (Losses) from Actual Sale Transactions						Impairment Losses on Securities								Unrealized Gains (Losses) from Changes in Fair Value of Equity Securities
	Fixed Maturity Securities		Equity Securities and Miscel- laneous Investments		Total		Fixed Maturity Securities			Miscel- laneous Investments		Total						Investment Gains (Losses)
Years Ended
December 31:
2015	$	16.3	$	75.0	$	91.3	$	—		$	—	$	—		$	—		$	91.3
2016	7.8		69.9		77.8		(4.9		)	—		(4.9		)	—			72.8
2017	16.6		194.9		211.6		—			—		—			—			211.6
Quarters Ended
March 31:
2017	2.6		12.1		14.8		—			—		—			—			14.8
2018	$	.2	$	15.2	$	15.5	$	—		$	—	$	—		$	(152.0	)	$	(136.4	)

Expenses: Benefits and Claims

The Company records the benefits, claims and related settlement costs that have been incurred during each accounting period. Total claim costs are affected by the amount of paid claims and the adequacy of reserve estimates established for current and prior years' claim occurrences at each balance sheet date.

The following table shows a breakdown of gross and net of reinsurance claim reserve estimates for major types of insurance coverages as of March 31, 2018 and December 31, 2017 :



			Claim and Loss Adjustment Expense Reserves
			March 31, 2018						December 31, 2017
			Gross			Net			Gross			Net

Workers' compensation			$	4,762.5		$	3,023.6		$	4,752.1		$	2,993.9
General liability			1,057.3			563.2			1,072.6			565.4
Commercial automobile (mostly trucking)			1,567.1			1,188.9			1,524.8			1,151.8
Other coverages			829.1			579.9			810.8			561.4
Unallocated loss adjustment expense reserves			229.3			205.7			225.1			198.8
		Total general insurance reserves	8,445.5			5,561.5			8,385.6			5,471.5
Title			558.7			558.7			559.7			559.7
RFIG Run-off			249.1			249.1			271.7			271.7
Life and accident			18.8			12.2			20.4			13.5
		Total claim and loss adjustment expense reserves	$	9,272.4		$	6,381.7		$	9,237.6		$	6,316.4
Asbestosis and environmental claim reserves included
	in the above general insurance reserves:
		Amount	$	112.9		$	93.3		$	117.4		$	96.4
		% of total general insurance reserves	1.3		%	1.7		%	1.4		%	1.8		%

The Company's reserve for loss and loss adjustment expenses represents the accumulation of estimates of ultimate losses payable, including IBNR losses and loss adjustment expenses. The establishment of claim reserves by the Company's insurance subsidiaries is a reasonably complex and dynamic process influenced by a large variety of factors as further discussed below. Consequently, reserves established are a reflection of the opinions of a large number of persons, of the application and interpretation of historical precedent and trends, of expectations as to future developments, and of management's judgment in interpreting all such factors. At any point in time, the Company is exposed to the incurrence of possibly higher or lower than anticipated claim costs and the resulting changes in estimates are recorded in operations of the periods during which they are made. Increases to prior reserve estimates are often referred to as unfavorable development whereas any changes that decrease previous estimates of the Company's ultimate liability are referred to as favorable development.

Overview of Loss Reserving Process

The Company's reserve setting process reflects the nature of its insurance business and the operationally decentralized basis upon which it is conducted. Old Republic's general insurance operations encompasses a large variety of lines or classes of commercial insurance; it has negligible exposure to personal insurance coverages such as homeowners or private passenger automobile insurance that exhibit wide diversification of risks, significant frequency of claim occurrences, and high degrees of statistical credibility. Additionally, the Company's insurance subsidiaries do not provide significant amounts of insurance protection for premises; most of its property insurance exposures relate to cargo, incidental property, and insureds' inland marine assets. Consequently, the wide variety of policies issued and commercial insurance customers served require that loss reserves be analyzed and established in the context of the unique or different attributes of each block or class of business produced by the Company. For example, accident liability claims emanating from insured trucking companies or from general aviation customers become known relatively quickly, whereas claims of a general liability nature arising from the building activities of a construction company may emerge over extended periods of time. Similarly, claims filed pursuant to errors and omissions or directors and officers liability coverages are usually not prone to immediate evaluation or quantification inasmuch as many such claims may be litigated over several years and their ultimate costs may be affected by the vagaries of judged or jury verdicts. Approximately 92% of the general insurance group's claim reserves stem from liability insurance coverages for commercial customers which typically require more extended periods of investigation and at times protracted litigation before they are finally settled. As a consequence of these and other factors, Old Republic does not utilize a single, overarching loss reserving approach.

The Company prepares periodic analyses of its loss reserve estimates for its significant insurance coverages. It establishes point estimates for most losses on an insurance coverage line-by-line basis for individual subsidiaries, sub-classes, individual accounts, blocks of business or other unique concentrations of insurance risks such as directors and officers liability, that have similar attributes. Actuarially or otherwise derived ranges of reserve levels are not utilized as such in setting these reserves. Instead the reported reserves encompass the Company's best point estimates at each reporting date and the overall reserve level at any point in time therefore represents the compilation of a very large number of reported reserve estimates and the results of a variety of formula calculations largely driven by analysis of historical data. Favorable or unfavorable developments of prior year reserves are implicitly covered by the point estimates incorporated in total reserves at each balance sheet date. The Company does not project future variability or make an explicit provision for uncertainty when determining its best estimate of loss reserves. Over the most recent decade actual incurred losses have developed within a reasonable range of their original estimates.

Aggregate loss reserves consist of liability estimates for claims that have been reported ("case") to the Company's insurance subsidiaries and reserves for claims that have been incurred but not yet reported or whose ultimate costs may not become fully apparent until a future time. Additionally, the Company establishes unallocated loss adjustment expense reserves for loss settlement costs that are not directly related to individual claims. Such reserves are based on prior years' cost experience and trends, and are intended to cover the unallocated costs of claim departments' administration of case and IBNR claims over time. Long-term, disability-type workers' compensation reserves are discounted to present value based on interest rates that range from 3.5% to 4.0%.

A large variety of statistical analyses and formula calculations are utilized to provide for IBNR claim costs as well as additional costs that can arise from such factors as monetary and social inflation, changes in claims administration processes, changes in reinsurance ceded and recoverability levels, and expected trends in claim costs and related ratios. Typically, such formulas take into account so-called link ratios that represent prior years' patterns of incurred or paid loss trends between succeeding years, or past experience relative to progressions of the number of claims reported over time and ultimate average costs per claim.

Overall, reserves pertaining to several hundred large individual commercial insurance accounts that exhibit sufficient statistical credibility, and at times may be subject to retrospective premium rating plans or the utilization of varying levels or types of self-insured retentions through captive insurers and similar risk management mechanisms are established on an account by account basis using case reserves and applicable formula-driven methods. Large account reserves are usually set and analyzed for groups of coverages such as workers' compensation, commercial auto and general liability that are typically underwritten jointly for many customers. For certain so-called long-tail categories of insurance such as retained or assumed excess liability or excess workers' compensation, officers and directors' liability, and commercial umbrella liability relative to which claim development patterns are particularly long, more volatile, and immature in their early stages of development, the Company judgmentally establishes the most current accident years' loss reserves on the basis of expected claim ratios. Such expected claim ratios typically reflect currently estimated claim ratios from prior accident years, adjusted for the effect of actual and anticipated rate changes, actual and anticipated changes in coverage, reinsurance, mix of business, and other anticipated changes in external factors such as trends in loss costs or the legal and claims environment. Expected claim ratios are generally used for the two to three most recent accident years depending on the individual class or category of business. As actual claims data emerges in succeeding interim and annual periods, the original accident year claim ratio assumptions are validated or otherwise adjusted sequentially through the application of statistical projection techniques such as the Bornhuetter/Ferguson method which utilizes data from the more mature experience of prior years to arrive at a likely indication of more recent years' loss trends and costs.

Title insurance and related escrow services loss and loss adjustment expense reserves are established as point estimates to cover the projected settlement costs of known as well as IBNR losses related to premium and escrow service revenues of each reporting period. Reserves for known claims are based on an assessment of the facts available to the Company during the settlement process. The point estimates covering all claim reserves take into account IBNR claims based on past experience and evaluations of such variables as changing trends in the types of policies issued, changes

in real estate markets and interest rate environments, and changing levels of loan refinancing, all of which can have a bearing on the emergence, number, and ultimate costs of claims.

RFIG Run-off mortgage guaranty insurance reserves for unpaid claims and claim adjustment expenses are recognized only upon an instance of default, defined as an insured mortgage loan for which two or more consecutive monthly payments have been missed. 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. 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 coverage rescissions and claims denials due to material misrepresentation in key underwriting information or non-compliance with prescribed underwriting guidelines, and management judgments relative to future employment levels, housing market activity, and mortgage loan interest costs, demand, and extensions.

The Company has the legal right to rescind mortgage insurance coverage unilaterally as expressly stated in its policy. Moreover, two federal courts that have considered that policy wording have each affirmed that right (See First Tennessee Bank N.A. v. Republic Mortg. Ins. Co. , Case No. 2:10-cv-02513-JPM-cgc (W.D. Tenn., Feb. 25, 2011) and JPMorgan Chase Bank N.A. v. Republic Mortg. Ins. Co. , Civil Action No. 10-06141 (SRC) (D. NJ, May 4, 2011), each decision citing supporting state law legal precedent). RMIC's mortgage insurance policy provides that the insured represents that a ll statements made and information provided to it in an application for coverage for a loan, without regard to who made the statements or provided the information, have been made and presented for and on behalf of the insured; and that s uch statements and information are neither false nor misleading in any material respect, nor omit any fact necessary to make such statements and information not false or misleading in any material respect. According to the policy, if any of those representations are materially false or misleading with respect to a loan, the Company has the right to cancel or rescind coverage for that loan retroactively to commencement of the coverage. Whenever the Company determines that an application contains a material misrepresentation, it either advises the insured in writing of its findings prior to rescinding coverage or exercises its unilateral right to rescind coverage for that loan, stating the reasons for that action in writing and returning the applicable premium. The rescission of coverage in instances of materially faulty representations or warranties provided in applications for insurance is a necessary and prevailing practice throughout the insurance industry. In the case of mortgage guaranty insurance, rescissions have occurred regularly over the years but have been generally immaterial. Since 2008, however, the Company has experienced a much greater incidence of rescissions due to increased levels of observed fraud and misrepresentations in insurance applications pertaining to business underwritten between 2004 and the first half of 2008. As a result, the Company has incorporated certain assumptions regarding the expected levels of coverage rescissions and claim denials in its reserving methodology since 2008. Such estimates, which are evaluated at each balance sheet date, take into account observed as well as historical trends in rescission and denial rates. The table below shows the estimated effects of coverage rescissions and claim denials on loss reserves and settled and incurred losses.



	March 31,			March 31,			December 31,			December 31,
	2018			2017			2017			2016
Estimated reduction in beginning reserve	$	19.0		$	29.6		$	29.6		$	47.5
Total incurred claims and settlement expenses
reduced (increased) by changes in
estimated rescissions:
Current year	1.2			1.7			6.2			8.3
Prior year	(2.1		)	(1.6		)	(3.7		)	(24.8		)
Sub-total	(.9		)	.1			2.5			(16.5		)
Estimated rescission reduction in paid claims	(1.4		)	(3.0		)	(13.1		)	(1.4		)
Estimated reduction in ending reserve	$	16.7		$	26.7		$	19.0		$	29.6

As noted above, the estimated reduction in ending loss reserves reflects, in large measure, a variety of judgments relative to the level of expected coverage rescissions and claim denials on loans that are in default as of each balance sheet date. The provision for insured events of the current year resulted from actual and anticipated rescissions and claim denials attributable to newly reported delinquencies in each respective year. The provision for insured events of prior years resulted from actual rescission and claim denial activity, reinstatement of previously rescinded or denied claims, or revisions in assumptions regarding expected rescission or claim denial rates on outstanding prior year delinquencies. The trends since 2010 reflect a continuing reduction in the level of actual and anticipated rescission and claim denial rates on total outstanding delinquencies. Claims not paid by virtue of rescission or denial represent the Company's estimated contractual risk, before consideration of the impacts of any reinsurance and deductibles or aggregate loss limits, on cases that are settled by the issuance of a rescission or denial notification. Variances between the estimated rescission and actual claim denial rate are reflected in the periods during which they occur.

Although the insured has no right under the policy to appeal a Company claim decision, the insured may, at any time, contest in writing the Company's findings or action with respect to a loan or a claim. In such cases, the Company considers any additional information supplied by the insured. This consideration may lead to further investigation, retraction or confirmation of the initial determination. If the Company concludes that it will reinstate coverage, it advises the insured in writing that it will do so immediately upon receipt of the premium previously returned. Reserves are not adjusted for potential reversals of rescissions or adverse rulings for loans under dispute since such reversals of claim rescissions and denials have historically been immaterial to the reserve estimation process.

Incurred Loss Experience

Management believes that the Company's overall reserving practices have been consistently applied over many years. For at least the past ten years, previously established aggregate reserves have produced reasonable estimates of the cumulative ultimate net costs of claims incurred. However, there are no guarantees that such outcomes will continue, and, accordingly, no representation is made that ultimate net claim and related costs will not develop in future years to be greater or lower than currently established reserve estimates. In management's opinion, however, such potential development is not likely to have a material effect on the Company's consolidated financial position, although it could affect materially its consolidated results of operations for any one annual or interim reporting period. See further discussion in the Company's 2017 Annual Report on Form 10-K under Item 1A - Risk Factors.

The following table shows an analysis of changes in aggregate reserves for the Company's losses, claims and settlement expenses for each of the periods shown.



	Quarters Ended
	March 31,
	2018			2017
Gross reserves at beginning of period	$	9,237.6		$	9,206.0
Less: reinsurance losses recoverable	2,921.1			2,766.1
Net reserves at beginning of period:
General Insurance	5,471.5			5,249.9
Title Insurance	559.7			602.0
RFIG Run-off	271.7			574.0
Other	13.5			13.8
Sub-total	6,316.4			6,439.8
Incurred claims and claim adjustment expenses:
Provisions for insured events of the current year:
General Insurance	546.3			513.3
Title Insurance	21.1			21.3
RFIG Run-off (a)	18.7			32.8
Other	5.7			7.0
Sub-total	591.9			574.6
Change in provision for insured events of prior years:
General Insurance	15.9			10.1
Title Insurance	(8.2		)	(10.3		)
RFIG Run-off (a)	(7.2		)	(13.0		)
Other	(2.3		)	(1.8		)
Sub-total	(1.8		)	(15.1		)
Total incurred claims and claim adjustment expenses (a)	590.1			559.5
Payments:
Claims and claim adjustment expenses attributable to
insured events of the current year:
General Insurance	104.2			94.1
Title Insurance	.1			.2
RFIG Run-off (a)(b)	—			.2
Other	2.2			2.5
Sub-total	106.7			97.1
Claims and claim adjustment expenses attributable to
insured events of prior years:
General Insurance	368.0			367.5
Title Insurance	13.6			14.7
RFIG Run-off (b)	34.0			53.4
Other	2.4			2.2
Sub-total	418.1			437.8
Total payments (b)	524.8			535.0
Amount of reserves for unpaid claims and claim adjustment expenses
at the end of each period, net of reinsurance losses recoverable: (c)
General Insurance	5,561.5			5,311.7
Title Insurance	558.7			598.1
RFIG Run-off	249.1			540.2
Other	12.2			14.2
Sub-total	6,381.7			6,464.3
Reinsurance losses recoverable	2,890.7			2,766.9
Gross reserves at end of period	$	9,272.4		$	9,231.3

__________

(a)

In common with all other insurance coverages, RFIG Run-off mortgage guaranty settled and incurred claim and claim adjustment expenses include only those costs actually or expected to be paid by the Company. As previously noted, changes in mortgage guaranty aggregate case, IBNR, and loss adjustment expense reserves shown below and entering into the determination of incurred claim costs, take into account, among a large number of variables, claim cost reductions for anticipated coverage rescissions and claims denials.

The RFIG Run-off mortgage guaranty provision for insured events of the current year was reduced by estimated coverage rescissions and claims denials of $1.2 and $1.7 for the quarters ended March 31, 2018 and 2017 , respectively. The provision for insured events of prior years for the periods shown in the table was (increased) reduced by estimated coverage rescissions and claims denials of $(2.1) and $(1.6) , respectively. Prior year development was also affected in varying degrees by differences between actual claim settlements relative to

expected experience, by reinstatement of previously rescinded or denied claims, and by subsequent revisions of assumptions in regards to claim frequency, severity or levels of associated claim settlement costs which result from consideration of underlying trends and expectations.


(b)	Rescissions reduced the Company's paid losses by an estimated $1.4 and $3.0 for the quarters ended March 31, 2018 and 2017 , respectively.


(c)	Net reserves for claims that have been incurred but are not yet reported ("IBNR") carried in each segment were as follows:




	March 31,		March 31,		December 31,
	2018		2017		2017
General Insurance	$	2,686.9	$	2,515.3	$	2,585.9
Title Insurance	478.0		521.5		479.3
RFIG Run-off	30.0		208.6		30.5
Other	4.7		5.0		4.7
Total	$	3,199.8	$	3,250.6	$	3,100.6

The percentage of net claims, benefits and related settlement expenses incurred as a percentage of premiums and related fee revenues of the Company's three major operating segments and for consolidated operations were as follows:



	General		Title		RFIG Run-off		Consolidated
Years Ended December 31:
2015	74.1	%	4.9	%	88.0	%	47.5	%
2016	73.0		3.8		60.4		44.0
2017	71.8		.9		160.9		44.7
Quarters Ended March 31:
2017	71.0		2.1		55.7		43.3
2018	71.5	%	2.5	%	53.7	%	44.6	%

The percentage of net claims, benefits and related settlement expenses measured against premiums earned by major types of general insurance coverage were as follows:



	General Insurance Claim Ratios by Type of Coverage
	All Coverages		Commercial Automobile (mostly trucking)		Workers' Compen-sation		Financial Indemnity		Inland Marine and Property		General Liability		Other
Years Ended
December 31:
2015	74.1	%	77.8	%	80.7	%	39.1	%	57.0	%	76.8	%	60.4	%
2016	73.0		79.4		76.1		45.5		60.9		77.5		62.2
2017	71.8		76.8		75.5		62.1		59.3		73.1		59.0
Quarters Ended
March 31:
2017	71.0		82.6		75.6		62.2		52.1		56.5		57.6
2018	71.5	%	79.0	%	72.6	%	74.9	%	63.6	%	69.9	%	57.6	%

The general insurance claim ratio for the first quarter 2018 was affected by better performance in workers compensation and commercial automobile (trucking) coverages. Poorer results for the relatively small and volatile general liability coverage and several other types of insurance, however, offset that better performance. For all coverages combined, current periods’ improving claim ratios were dampened by unfavorable developments of prior years’ reserves. These amounted to 2.0 and 1.4 percentage points in the first quarter of 2018 and 2017, respectively.

Unfavorable A&E claim developments, although not material in any of the periods presented, are typically attributable to changes in A&E claim reserves resulting from periodic re-evaluations of such reserves as well as subsequent reclassifications of other coverages' reserves, most often workers' compensation, deemed assignable to A&E category of losses. Except for a small portion that emanates from ongoing primary insurance operations, a large majority of the A&E claim reserves posted by Old Republic stem mainly from its participations in assumed reinsurance treaties and insurance pools which were discontinued during the 1980's and have since been in run-off status. With respect to the primary portion of gross A&E reserves, Old Republic administers the related claims through its claims personnel as well as outside attorneys, and posted reserves reflect its best estimates of ultimate claim costs. Claims administration for the assumed portion of the Company's A&E exposures is handled by the claims departments of unrelated primary or ceding reinsurance companies. While the Company performs periodic reviews of certain claim files managed by third parties, the overall A&E reserves it establishes respond to the paid claim and case reserve activity reported to the Company as well as available industry statistical data such as so-called survival ratios. Such ratios represent the number of years'

average paid losses for the three or five most recent calendar years that are encompassed by an insurer's A&E reserve level at any point in time. According to this simplistic appraisal of an insurer's A&E loss reserve level, Old Republic's average five year survival ratios stood at 4.6 years (gross) and 6.4 years (net of reinsurance) as of March 31, 2018 and 4.6 years (gross) and 6.3 years (net of reinsurance) as of December 31, 2017 . Fluctuations in this ratio between years can be caused by the inconsistent pay out patterns associated with these types of claims. Incurred net losses for A&E claims have averaged .5% of general insurance group net incurred losses for the five years ended December 31, 2017 .

Title insurance claim ratios have remained in the single digits for a number of years due to a continuation of favorable trends in claims frequency and severity. Favorable developments of reserves established in prior years reduced the claim ratio by 1.6 and 2.0 percentage points in the first quarter of 2018 and 2017, respectively.

The RFIG Run-off mortgage guaranty claim costs rose disproportionately to earned premiums in both quarterly periods. The indicated claim ratios (54.8% in 2018 and 35.0% in 2017) reflect reductions of 27.6 and 34.9 percentage points, respectively, due to favorable developments of prior years’ reserves.

Certain mortgage guaranty average claims related trends are listed below:



	Average Settled Claim Amount (a)				Reported Delinquency Ratio at End of Period				Claims Rescissions and Denials
	Traditional Primary		Bulk		Traditional Primary		Bulk		Claims Rescissions and Denials
Years Ended December 31:
2015	$	45,745	$	46,669	10.45	%	26.74	%	$	33.0
2016	45,478		48,158		10.53		25.78		1.4
2017	47,267		51,446		10.52		23.31		13.1
Quarters Ended March 31:
2017	48,375		51,865		9.85		24.59		3.0
2018	$	48,005	$	60,808	9.84	%	20.84	%	$	1.4

__________


(a)	Amounts are in whole dollars.



			Traditional Primary Delinquency Ratios for Top Ten States (b):
	TX		FL		GA		IL		CA		NC		PA		MD		NJ		VA
As of December 31:
2015	7.7	%	13.5	%	8.4	%	10.8	%	6.1	%	8.6	%	12.2	%	13.3	%	25.0	%	8.5	%
2016	9.1		11.8		8.7		10.7		6.1		8.3		12.7		12.8		23.5		8.6
2017	11.4		15.6		8.3		10.1		6.0		8.1		12.0		11.5		19.6		8.4
As of March 31:
2017	8.1		11.1		7.8		9.8		6.2		7.6		11.9		12.2		22.2		7.7
2018	10.7	%	14.2	%	7.5	%	9.1	%	6.0	%	7.9	%	11.5	%	10.7	%	17.1	%	7.7	%



			Bulk Delinquency Ratios for Top Ten States (b):
	TX		FL		GA		IL		CA		AZ		PA		OH		NJ		NY
As of December 31:
2015	19.0	%	38.9	%	17.6	%	25.7	%	26.0	%	22.4	%	26.9	%	16.3	%	59.0	%	52.1	%
2016	20.3		33.7		19.6		23.6		29.1		24.4		28.1		14.1		61.0		53.3
2017	20.3		34.2		17.8		21.5		26.4		24.6		25.3		15.0		50.3		44.2
As of March 31:
2017	19.3		30.8		21.1		21.7		28.9		25.4		23.2		13.3		60.6		49.1
2018	16.9	%	31.1	%	16.9	%	18.2	%	23.8	%	21.7	%	23.3	%	13.8	%	44.2	%	36.0	%



	Total Delinquency Ratios for Top Ten States (includes "other" business) (b):
	TX		FL		GA		IL		CA		NC		PA		MD		NJ		VA
As of December 31:
2015	8.3	%	15.9	%	8.8	%	11.5	%	9.3	%	9.0	%	13.0	%	14.2	%	27.4	%	8.9	%
2016	9.8		13.4		9.1		11.3		9.3		8.5		13.5		13.5		25.6		8.7
2017	12.1		16.9		8.8		10.6		9.2		8.4		12.8		12.0		21.1		8.6
As of March 31:
2017	8.8		12.7		8.5		10.4		9.6		8.0		12.5		12.9		24.4		8.0
2018	11.1	%	15.2	%	8.0	%	9.4	%	8.7	%	8.0	%	12.2	%	10.8	%	18.3	%	7.8	%

__________


(b)	As determined by risk in force as of March 31, 2018 , these 10 states represent approximately 52.4%, 57.6%, and 52.3%, of traditional primary, bulk, and total risk in force, respectively.

The following table shows CCI claims related trends for the periods shown:



										Reported Delinquency Ratio at End of Period		Claim Rescissions and Denials
	CCI Claim Costs
	Paid					Incurred
	Amount			Ratio (a)		Amount		Ratio (a)
Years Ended
December 31:
2015	$	35.6		148.8	%	$	83.0	346.9	%	2.1	%	$	19.1
2016	11.7			74.0		50.0		315.9		2.0		10.1
2017	304.2			N/M		134.5		N/M		2.6		5.7
Quarters Ended
March 31:
2017	2.7			65.1		8.8		209.2		2.0		2.0
2018	$	(.7	)	(179.4	)%	$	—	(3.0	)%	2.2	%	$	.2

__________

(a)

Percent of net CCI earned premiums. CCI claims ratios include only those costs actually or expected to be paid by the Company and exclude claims not paid by virtue of coverage rescissions and claims denials as well as unsubstantiated claim submissions. Certain claim rescissions and denials may from time to time become the subject of disagreements between the Company and certain individual insureds. Possible future reversals of such rescissions and denials, however, may not necessarily affect the adequacy of previously established claim reserve levels nor fully impact operating results. These effects could be fully or partially negated by the imposition of additional retrospective premiums and/or the limiting effects of maximum policy limits.

Reinsurance Programs

To maintain premium production within its capacity and limit maximum losses and risks for which it might become liable under its policies, Old Republic may cede a portion or all of its premiums and liabilities on certain classes of insurance, individual policies, or blocks of business to other insurers and reinsurers. Further discussion of the Company's reinsurance programs can be found in Part 1 of the Company's 2017 Annual Report on Form 10-K.

Expenses: Underwriting Acquisition and Other Expenses

The following table sets forth the expense ratios registered by each major business segment and in consolidation for the periods shown:



	General		Title		RFIG Run-off		Consolidated
Years Ended December 31:
2015	23.5	%	88.3	%	10.0	%	48.5	%
2016	24.8		87.9		12.2		50.6
2017	25.5		90.0		16.6		52.0
Quarters Ended March 31:
2017	24.9		91.5		19.2		51.4
2018	26.3	%	93.3	%	20.0	%	52.1	%

Variations in the Company's consolidated expense ratios reflect a continually changing mix of coverages sold and attendant costs of producing business in the Company's three largest business segments. To a significant degree, expense ratios for both the general and title insurance segments are mostly reflective of variable costs, such as commissions or similar charges, that rise or decline along with corresponding changes in premium and fee income. Moreover, general operating expenses can contract or expand in differing proportions due to varying levels of operating efficiencies and expense management opportunities in the face of changing market conditions. The 2018 General Insurance expense ratio increased nearly 6% to 26.3%. This was largely caused by different production cost structures affecting some faster growing coverages in this year’s first quarter. The Title Insurance expense ratio to premiums and fees rose to 93.3% in this year’s first quarter compared to 91.5% in the same period of 2017. The higher costs related mostly to rising salaries and associated benefits expenses.

Expenses: Total

The composite underwriting ratios of the above summarized net claims, benefits and underwriting expenses that reflect the sum total of all the factors enumerated above have been as follows:



	General		Title		RFIG Run-off		Consolidated
Years Ended December 31:
2015	97.6	%	93.2	%	98.0	%	96.0	%
2016	97.8		91.7		72.6		94.6
2017	97.3		90.9		177.5		96.7
Quarters Ended March 31:
2017	95.9		93.6		74.9		94.7
2018	97.8	%	95.8	%	73.7	%	96.7	%

Expenses: Income Taxes

The effective consolidated income tax rates was (167.5%) in the first quarter of 2018, compared to 31.3% in the first quarter of 2017. The rates for each period reflect primarily the varying proportions of pretax operating income (loss) derived from partially tax sheltered investment income (principally tax-exempt interest and dividend income), the combination of fully taxable investment income, investment gains or losses, underwriting and service income, and judgments about the recoverability of deferred tax assets, and changes in the federal corporate tax rate to 21.0% from 35.0% effective for 2018.

OTHER INFORMATION

Reference is here made to "Information About Segments of Business" appearing elsewhere herein.

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 particularly affected 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 investment yields 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. Title Insurance and RFIG Run-off 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. Life and accident 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 2017 Annual Report with 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.

OLD REPUBLIC INTERNATIONAL CORPORATION

Item 3 - Quantitative and Qualitative Disclosure About Market Risk

Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments as a result of changes in interest rates, equity prices, foreign exchange rates and commodity prices. Old Republic's primary market risks consist of interest rate risk associated with investments in fixed maturities and equity price risk associated with investments in equity securities. The Company has no material foreign exchange or commodity risk.

Old Republic's market risk exposures at March 31, 2018 , have not materially changed from those identified in the Company's 2017 Annual Report on Form 10-K.

Item 4 - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company's principal executive officer and its principal accounting officer have evaluated the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based upon their evaluation, the principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective for the above referenced evaluation period.

Changes in Internal Control

During the three month period ended March 31, 2018 , there were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

OLD REPUBLIC INTERNATIONAL CORPORATION

FORM 10-Q

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

The information contained in Note 7 "Commitments and Contingent Liabilities" of the Notes to Consolidated Financial Statements filed as Part 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A - Risk Factors

There have been no material changes with respect to the risk factors disclosed in the Company's 2017 Annual report on Form 10-K.

Item 6 - Exhibits

(a) Exhibits



31.1			Certification by Aldo C. Zucaro, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as
			adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification by Karl W. Mueller, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as
			adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification by Aldo C. Zucaro, Chief Executive Officer, pursuant to Section 1350, Chapter 63 of Title 18,
			United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification by Karl W. Mueller, Chief Financial Officer, pursuant to Section 1350, Chapter 63 of Title 18,
			United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			XBRL Instance Document

101.SCH			XBRL Taxonomy Extension Schema

101.CAL			XBRL Taxonomy Extension Calculation Linkbase

101.DEF			XBRL Taxonomy Extension Definition Linkbase

101.LAB			XBRL Taxonomy Extension Label Linkbase

101.PRE			XBRL Taxonomy Extension Presentation Linkbase

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Old Republic International Corporation
		(Registrant)
Date:	May 9, 2018

		/s/ Karl W. Mueller

		Karl W. Mueller Senior Vice President, Chief Financial Officer, and Principal Accounting Officer

EXHIBIT INDEX



Exhibit
No.		Description

31.1		Certification by Aldo C. Zucaro, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as
		adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by Karl W. Mueller, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as
		adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Aldo C. Zucaro, Chief Executive Officer, pursuant to Section 1350, Chapter 63 of Title
		18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by Karl W. Mueller, Chief Financial Officer, pursuant to Section 1350, Chapter 63 of Title
		18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

TABLE OF CONTENTS

Part Iprint Part II Other Information:print Part IIprint Item 1 - Legal Proceedings 49print Item 1 - Legal Proceedingsprint Item 1A - Risk Factors 49print Item 1A - Risk Factorsprint Item 6 - Exhibits 49print Item 6 - Exhibitsprint Item 3 - Quantitative and Qualitative Disclosure About Market Riskprint Item 4 - Controls and Proceduresprint Part II - Other Informationprint

Exhibits

31.1 Certification by Aldo C. Zucaro, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification by Karl W. Mueller, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification by Aldo C. Zucaro, Chief Executive Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification by Karl W. Mueller, Chief Financial Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

DIRECTORS	AGE	BIO
Teresa A Taylor	61	Teresa A. Taylor CHIEF EXECUTIVE OFFICER OF BLUE VALLEY ADVISORS, LLC Biography: Since April 2011, Ms. Taylor has served as Chief Executive Officer of Blue Valley Advisors, LLC, an advisory firm. Ms. Taylor served as Chief Operating Officer of Qwest Communications, Inc., a telecommunications carrier, from August 2009 to April 2011. She served as Qwest’s Executive Vice President, Business Markets Group, from January 2008 to April 2009 and served as its Executive Vice President and Chief Administrative Officer from December 2005 to January 2008. Ms. Taylor served in various positions with Qwest and the former US West beginning in 1987. During her 24-year tenure with Qwest and US West, she held various leadership positions and was responsible for strategic planning and execution, sales, marketing, product, network, information technology, human resources and corporate communications. Ms. Taylor holds a Bachelor of Science degree from the University of Wisconsin-LaCrosse. Qualifications and Skills Supporting Election to the Board: Expertise in technology, media and telecommunications industries Expertise in strategic planning and execution, technology development, human resources, labor relations and corporate communications Public company director and committee experience
Srikant M Datar	71	Srikant M. Datar GEORGE F. BAKER PROFESSOR OF ADMINISTRATION; DEAN OF THE FACULTY OF THE GRADUATE SCHOOL OF BUSINESS ADMINISTRATION AT HARVARD UNIVERSITY Biography: Mr. Datar is the George F. Baker Professor of Administration and Dean of the Faculty of the Graduate School of Business Administration at Harvard University since January 2021. Mr. Datar is a Chartered Accountant and planner in industry, and has been a professor of accounting and business administration at Harvard since July 1996. He previously served as a professor at Stanford University and Carnegie Mellon University. Mr. Datar received gold medals upon his graduation from the Indian Institute of Management, Ahmedabad, and the Institute of Cost and Works Accountants of India. Mr. Datar holds a Master’s degree in Statistics and Economics and a Ph.D. in Business from Stanford University. Qualifications and Skills Supporting Election to the Board: Expertise in finance, accounting, governance and risk management Public company director and committee experience Academic and commercial perspective on complex issues
Marcelo Claure	50	Marcelo Claure ENTREPRENEUR & INVESTOR FORMER CHIEF EXECUTIVE OFFICER OF SOFTBANK INTERNATIONAL Biography: Mr. Claure is a global entrepreneur and investor, and Founder & CEO of Claure Group, a multi-billion-dollar global investment firm spanning multiple high growth sectors, including AI & technology, energy transition, fashion and entertainment, and sports. Through his investment firm, Claure Group, Mr. Claure provides strategic capital and expertise to many of his portfolio companies’ and funds’ management teams, including SHEIN, the fastest growing on-demand fashion company globally, where he is Group Vice Chairman; Brightstar Capital Partners, a private investment firm focused on middle-market companies, where he is Co-Chairman; Bicycle Capital, Latin America’s leading growth equity fund; Open Opportunity Fund, a fund supporting Black and Hispanic tech founders in the US; and eB Capital, a Brazil-focused investment platform. Additionally, Mr. Claure is the Co-Chair of Digital Data Design (D^3) Institute at Harvard Business School, an organization which focuses on shaping the future of business and society through digital and AI-driven business initiatives. Mr. Claure served as the Chief Executive Officer of SoftBank International and the Chief Operating Officer of SoftBank from May 2018 until January 2022. In addition, Mr. Claure served as a director of SoftBank from 2017 to 2020. He was also Executive Chairman of WeWork from October 2019 until January 2022. Previously, Mr. Claure served as Sprint’s President and Chief Executive Officer, serving as President from August 2014 until January 2018 and as Chief Executive Officer from August 2014 until May 2018. Mr. Claure was Executive Chairman of Sprint prior to the Sprint Combination and served on the Sprint board of directors. Prior to joining Sprint, Mr. Claure was Chief Executive Officer of Brightstar Corp., a company he founded in 1997 and grew from a small Miami-based distributor of mobile device accessories into a global business with more than $10 billion in gross revenue for the year ended 2013. Mr. Claure received a B.S. in Economics and Finance and an honorary Doctorate of Commercial Science from Bentley University. He also received an honorary Doctorate of Laws from Babson College. He is also an Executive Fellow at Harvard Business School. Qualifications and Skills Supporting Election to the Board: Former CEO and Executive Chairman of Sprint Expertise in telecommunications and technology industries Global communications and investment experience
Letitia A Long	66	Letitia A. Long MEMBER, VIRGINIA TECH BOARD OF VISITORS; CHAIR, BOARD OF THE INTELLIGENCE & NATIONAL SECURITY ALLIANCE Biography: Ms. Long currently serves on the Virginia Tech Board of Visitors and is the Chair of the Board of the Intelligence & National Security Alliance. Ms. Long previously served on the board of directors of Urthecast Corporation from 2015 to 2018, the board of directors of Raytheon Company from 2015 to 2020, and the board of directors of Sonatype from 2017 to 2019. Additionally, she was the Deputy Director of Naval Intelligence for the Department of Defense from 2000 to 2003, the Deputy Undersecretary of Defense Intelligence (Planning, Policy & Resources) from 2003 to 2006, the Deputy Director of the Defense Intelligence Agency from 2006 to 2010, and the Director of the National Geospatial-Intelligence Agency from 2010 to 2014. Ms. Long received her Bachelor of Science in Electrical Engineering from Virginia Polytechnic Institute and State University and her Master of Science in Engineering from The Catholic University of America. Qualifications and Skills Supporting Election to the Board: Leadership in the intelligence community Expertise on national security issues impacting the telecommunications industry Expertise on cybersecurity
Kelvin R Westbrook		2025 Director Nominees The Board has nominated 13 nominees for election at the Annual Meeting to serve as directors for terms that would end at the 2026 annual meeting of stockholders. Other than Mr. Dannenfeldt, all nominees were elected at the 2024 annual meeting of stockholders. Committee memberships will be determined following the conclusion of the Annual Meeting. Mr. Westbrook will not stand for re-election at the Annual Meeting, and his Board service will end at the conclusion of the Annual Meeting. The Board would like to recognize Mr. Westbrook for his service and his contributions as a member of the Board. Committee memberships will be determined following the conclusion of the Annual Meeting. Each nominee was nominated by the Board on the recommendation of the Nominating and Corporate Governance Committee. The Board has found each nominee to be qualified based on his or her qualifications, experience, attributes, skills and whether he or she meets the applicable independence standards. Each of the nominees has consented to stand for election and we do not anticipate any candidate will be unavailable to serve. In the event that any of the nominees should be unavailable for election as a result of an unexpected occurrence, shares may be voted for the election of such substitute nominee as the Board may nominate. In the alternative, if a vacancy remains, the Board may fill such vacancy at a later date or reduce the size of the Board, subject to certain requirements in our certificate of incorporation. The Board knows of no reason why any of the nominees would be unavailable or unable to serve. Messrs. Höttges, Almeida, Claure, Dannenfeldt, Illek, Kavanaugh, Kübler, and Langheim, and Ms. Leroy were designated for nomination by Deutsche Telekom pursuant to its rights under our certificate of incorporation and the Stockholders’ Agreement. Mr. Datar and Mses. Taylor and Long were designated for nomination by the Nominating and Corporate Governance Committee. REQUIRED VOTE Under our bylaws, directors are elected by a plurality of the votes cast by stockholders entitled to vote on the election of directors at the Annual Meeting. Shares represented by executed proxies received by the Company will be voted, unless otherwise marked withheld, “FOR” the election of each of the nominees.
James J Kavanaugh	58	James J. Kavanaugh CHIEF FINANCIAL OFFICER, INTERNATIONAL BUSINESS MACHINES CORPORATION Biography: Mr. Kavanaugh has been the chief financial officer of International Business Machines Corporation (“IBM”) since January 2018, overseeing accounting and controllership, financial planning and analysis, tax, internal audit, investor relations, corporate strategy, corporate development and treasury of the company’s worldwide financial operations. Prior to that, he was senior vice president, Transformation & Operations, where he was responsible for redesigning IBM’s operating model to align with fundamental market shifts and driving new ways of working while incorporating speed and agility throughout the enterprise. In his current role as the CFO at IBM, Mr. Kavanaugh continues to oversee Transformation & Operations, including the Chief Information Office, as well as the company’s Global Chief Data Office, Enterprise Operations & Services and Real Estate Operations. Mr. Kavanaugh first joined IBM in 1996 from AT&T Corporation, where he was the chief financial officer, Americas Global Services. He earned his Master of Business Administration degree from The Ohio State University. Qualifications and Skills Supporting Election to the Board: Complex financial management experience

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Compensation ($)		All Other Compensation ($)		Total ($)
G. Michael Sievert		2024		1,848,077		—		20,422,982		—		7,723,750		45,437		30,040,245
President & Chief Executive Officer		2023		1,748,414		—		29,281,807		—		6,387,500		71,131		37,488,851
President & Chief Executive Officer		2022		1,664,285		—		20,175,892		—		7,128,588		91,282		29,060,048
Peter Osvaldik		2024		975,000		—		7,161,891		—		3,256,500		14,130		11,407,521
Executive Vice President and Chief Financial Officer		2023		950,000		—		17,594,929		—		2,565,950		13,200		21,124,079
Executive Vice President and Chief Financial Officer		2022		800,000		—		6,864,054		—		2,394,000		12,200		10,070,254
Mark W. Nelson		2024		975,000		—		6,803,731		—		3,012,263		14,291		10,805,285
Executive Vice President and General Counsel		2023		950,000		—		7,046,147		—		2,565,950		14,115		10,576,212
Executive Vice President and General Counsel		2022		950,000		—		8,447,371		—		3,005,325		75,472		12,478,167
Michael J. Katz		2024		850,000		—		5,931,282		—		2,626,075		18,630		9,425,987
President, Marketing, Strategy & Products		2023		800,000		—		5,204,908		—		1,752,000		13,200		7,770,108
Jonathan A. Freier		2024		825,000		—		5,181,184		—		2,548,838		130,125		8,685,147
President, Consumer Group		2023		790,000		—		4,626,009		—		1,730,100		22,506		7,168,616
Callie R. Field		2024		825,000		—		5,181,184		—		2,548,838		13,800		8,568,822
President, Business Group		2023		790,000		—		4,626,009		—		1,730,100		13,200		7,159,309

Supplier name	Ticker
Tesla, Inc.	TSLA
Toyota Motor Corporation	TM
Canaan Inc.	CAN
Cigna Corporation	CI
General Motors Company	GM
CME Group Inc.	CME
Intercontinental Exchange, Inc.	ICE

Owner	Position	Direct Shares	Indirect Shares
DEUTSCHE TELEKOM AG	-	670,278,000	0
CLAURE RAUL MARCELO	-	1,847,380	1,441,200
SIEVERT G MICHAEL	-	489,839	95,000
SIEVERT G MICHAEL	-	381,222	95,000
Ray Neville R	-	250,642	0
Freier Jon	-	175,901	0
Freier Jon	-	162,628	0
Katz Michael J.	-	161,203	0
Katz Michael J.	-	118,977	0
Field Callie R	-	102,555	0
CANO NESTOR	-	99,050	4,400
Field Callie R	-	93,916	0
Osvaldik Peter	-	87,866	0
CANO NESTOR	-	64,163	5,500
Osvaldik Peter	-	61,310	0
King Deeanne	-	57,625	0
Nelson Mark Wolfe	-	52,878	0
King Deeanne	-	45,035	0
Ewaldsson Ulf	-	44,025	0
Gopalan Srini	-	38,994	0
Ewaldsson Ulf	-	36,727	0
Drobac Daniel James	-	32,904	0
WESTBROOK KELVIN R	-	15,823	0
Bazzano Dara	-	6,924	0
Bazzano Dara	-	5,794	0
Long Letitia A	-	5,653	0
Taylor Teresa	-	5,631	0
Almeida Andre	-	4,324	0
Datar Srikant M.	-	3,291	8,200
KAVANAUGH JAMES J	-	1,582	0

ORI 10-Q Quarter ended March 31, 2018

Exhibits