Old Republic International Corp. is seeking new capital for its private mortgage insurance operations with the goal of having it write business again.
After the capital raise, RMIC Companies Inc. will be spun-out of ORI. ORI will own less than 10% of RMICC, letting it focus on the title and general insurance lines.
This would be the first legacy carrier in run-off to resume underwriting operations if ORI is successful. It previously tried to spin out the private mortgage insurance business into a holding company called Republic Financial Indemnity Group but ran into objections from investors.
In ORI’s 3Q13 results, RFIG’s mortgage insurance segment (there is another run-off business included in RFIG) had pretax operating income of $41 million, compared with a loss of $126 million one year prior.
The new capital will be used to support the existing book of business, pay off any deferred claim obligations Republic Mortgage Insurance Co. has accumulated and to end RMIC’s current status of being supervised by North Carolina insurance regulators. If successful, and pending approval by regulators, Fannie Mae and Freddie Mac, the company will start underwriting again in early 2014.
ORI will make a $50 million capital contribution to RMIC Companies. At some point after the recapitalization, it will dispose of the small stake in RMICC.