Old Republic International Corp., Chicago, is planning to merge its private mortgage insurance business with another unit that is also in run-off, the consumer credit indemnity division and split them off from the parent company. The combination will operate under the name Republic Financial Indemnity Group Inc.
In the announcement, ORI said capital associated with these related lines of business that had been in place at the end of 2006 has been depleted, and that while it "maintains a long-term strategic interest" in these businesses, it is not giving them any more money because "they no longer meet its enterprise risk management disciplines and business diversification objectives."
Therefore, ORI said any future recapitalization of these businesses would be better implemented if they were separated from the holding company.
According to data provided by ORI, if RFIG had existed last year, it would have lost $421 million, with losses of $231 million in 2010, $382 million in 2009 and $431 million in 2008.
Without the overhang of the RFIG businesses, ORI would have been profitable three out of the last four years (the exception being 2008) and would have made $280 million last year. This is in comparison to the loss of $140 million it reported for 2011.
