Fitch Affirms Ratings on Old Republic International and Subsidiaries.

CHICAGO -- Fitch Ratings has affirmed Old Republic International Corporation's (ORI) 'AA-' Issuer Default Rating (IDR), 'A+' senior debt rating, and 'F1' commercial paper rating. The 'AA' Insurer Financial Strength (IFS) ratings of the property/casualty operating subsidiaries as well as Republic Mortgage Insurance Corporation were also affirmed. Finally, the 'AA-' IFS ratings of the title insurance operating subsidiaries were affirmed. The Rating Outlook is Stable.

ORI's ratings are supported by its consistently high level of profitability and a conservative management philosophy centered around a strong balance sheet. Balanced against these strengths are the company's moderate size and market share relative to similarly rated peers.

Three lines of business inside ORI, commercial lines property and casualty, mortgage insurance, and title insurance, generate the majority of revenues and operating income. The property and casualty business consists of a diverse group of commercial insurers with a focus providing specialty liability coverage to small, medium, and large businesses involved in transportation (trucking and general aviation), construction, forest products, and energy as well as public entities such as municipalities.

Old Republic's Property Casualty business (ORPC) more than doubled its top line as forecast by management over the past five-year period and was the driving force behind ORI's most profitable year in its history in 2005. Strong operating results have been achieved through disciplined underwriting that is focused on profitable organic growth of existing businesses as opposed to acquisition-oriented growth or rapid expansion into new products.

Management's conservative philosophy and long-term perspective are evidenced by the very strong capitalization of its operating subsidiaries, modest holding company financial leverage, and diversified sources of revenue. A key component to balance sheet strength is loss reserves, which Fitch views as adequate. Specifically, Fitch estimates a moderate redundancy among ORPC's non-asbestos reserves and a moderate deficiency among asbestos related reserves. Fitch believes ORPC's results reflect management's conservative underwriting and reserving practices and limited exposure to latent liabilities which has resulted in reserve redundancies in recent years as opposed to the meaningful reserve deficiencies experienced by many commercial lines competitors.

The mortgage insurance segment led by Republic Mortgage Insurance Corp. (RMIC) accounted for one-third of ORI's pre-tax operating income during 2005 after peaking at more than 50% of consolidated pre-tax operating income in 2001. Like most of the U.S. mortgage insurance industry, earnings growth at RMIC has been negatively affected in the past few years by lessened demand for insurance as a result of the proliferation of 'mortgage avoidance' products being offered in the marketplace, the majority of which are being provided by RMIC's primary customer base.

Losses within the mortgage guaranty insurance portfolio continue to remain below expected levels, reflecting the strong real estate markets in the U.S. over the past few years. Given the competitive environment, however, RMIC, as have many of its competitors in the mortgage guaranty insurance industry, has been forced to explore new venues for growth opportunities. These new growth opportunities such as sub-prime mortgages and reduced documentation mortgages generally entail greater risk.

ORI's title insurance business (ORT) is the smallest among the five national title insurers with a 6% share of the market measured by premium volume. The market share has been stable over the recent past, pointing to ORT's ability to defend its competitive position in a consolidating market. The company's distribution favors agents over owned distribution, which is different than most national peers. Consequently, ORT's cost structure is more variable and should help preserve profits when the title market slows down.

ORI's Stable Rating Outlook reflects Fitch's view that the company will continue to achieve above-average profitability while adhering to its conservative operating philosophy. Profitability from the mortgage insurance and title insurance operations is expected to moderate given deterioration in the real estate and mortgage markets; however, profitability in ORI's property and casualty insurance business is expected to remain favorable. ORI's IDR benefits from modest financial leverage, and consequently, would be adversely affected by a substantial increase in debt. Additionally, Fitch expects ORI's long-term practice of maintaining strong capitalization at its operating subsidiaries and focusing on profitable and organic growth to continue.

The following are affirmed, with a Stable Outlook:

Old Republic International Corp.

--Long-term IDR at 'AA-';

--Senior debt at 'A+';

--Commercial paper at 'F1'.

Republic Mortgage Insurance Corp.

--IFS 'AA'.

Old Republic Title Group

--IFS 'AA-'.

In addition, Fitch affirms the IFS rating of the members of the Old Republic Property Casualty Group, at 'AA', with a Stable Outlook:

Bituminous Casualty Corp.

Bituminous Fire & Marine Insurance Co.

Great West Casualty Co.

Old Republic Insurance Co.

Old Republic Lloyds of Texas

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.