Old Republic considers reactivating mortgage insurance unit

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Old Republic International Corp. is again making noise about bringing its mortgage insurance subsidiary back to active status, while separating it out from the holding company.

Republic Mortgage Insurance Co. has been operating in run-off mode since September 2011 in order to maintain its existing book of business and pay claims if loans were to go into foreclosure.

The unit was placed into runoff by North Carolina regulators as its capital position deteriorated because of a large amount of claims related to loans, particularly nonprime mortgages, with policies written during the mid-2000s.

RMIC's existing book of business is expected to be wound down by 2022. "And so that between now and then…we're really certain that we're going to figure out the most appropriate way for activating a best long term outcome for what we consider to be a most valuable and very viable operating franchise that we have in our RMIC companies," ORI Chairman and CEO Aldo Zucaro said during the second quarter earnings conference call.

When asked during the call if he could provide additional color around what he meant by using activating, "Well, I meant activating in some fashion outside of the Old Republic holding company system," Zucaro said. "We think that down the road there's going to be basis for activating that company in one fashion or another, but even though we do not at the moment have any aspirations to forcefully re-enter the business."

At year-end 2016, RMIC had net risk-in-force of $5.4 billion, down from $6.9 billion on Dec. 31, 2015 and $8.6 billion on the same day in 2014, according to a Securities and Exchange Commission filing.

If RMIC starts writing new business again, it would bring the number of active private mortgage insurers back up to seven. It has been at six since the end of last year when Arch Capital Group Ltd. purchased United Guaranty Corp. from American International Group.

Old Republic attempted twice to recapitalize RMIC and have it start writing new policies. It sought to spin off Republic Financial Indemnity Group, the unit where RMIC and another ORI unit currently in runoff reside, but cancelled the plans June 2012 as stakeholders that the company refused to identify felt the MI business had more value remaining in runoff under ORI's ownership.

The second failed attempt was announced in October 2013, but was cancelled in March 2014, citing the inability to raise capital on the desired terms.

But a month later on the first-quarter 2014 conference call, Zucaro said ORI had "not given up on the idea of allowing RMIC to be resurrected."

ORI has not yet returned a call for further comment.

During the second quarter, ORI's private mortgage insurance business had pretax operating income of $19.3 million, down from $29.9 million, because of reduced premiums earned by the runoff book of business and lower investment income.

ORI earned $101.6 million for the quarter, compared with $101 million one year prior. Pretax operating income for its title insurance unit was $65 million, up from $44.6 million in the second quarter of 2016.

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