Old Republic Restates 3Q Results, Earnings Up

Old Republic International Corp., Chicago, has restated its results for the third quarter 2009 that reduces the net loss it reported, and company executives are none too happy about it. The issue involves $82.5 million received by Republic Mortgage Insurance Co. from captive reinsurance arrangements with mortgage lenders that was to cover future losses. The company's accountants had argued that generally accepted accounting principles require the money be recognized immediately as income, because it is treated as the termination of the reinsurance agreements, not as transactions where ORI/RMIC takes on new risk. Since revealing the potential for the restatement back in November 2009, ORI has been in discussions with the Securities and Exchange Commission's Office of the Chief Accountant and its auditors, PricewaterhouseCoopers LLP. As a result of the restatement, the third quarter sees an increase of its premium income of $82.5 million and a decrease of the post-tax loss by $53.6 million. Therefore, its net operating loss for the third quarter 2009, instead of $66.1 million, is now $12.4 million. The nine-month net operating loss went from $169.6 million down to $166.0 million. A.C. Zucaro, ORI's chairman and chief executive, said the resolution of the timing issues "reinforces our belief that GAAP accounting for mortgage guaranty insurers must change. The necessity for change is to at once effect a more pragmatic and realistic matching of premium revenues and normally recurring claim costs, and ensure that the accounting better reflects the inherent long-term economic catastrophe indemnity provided by the coverage." ORI's year-end results will be released on Jan. 28.