ORI - Old Republic lands Neutral rating as Piper sees profit headwinds
2023-05-17 09:01:56 ET
Piper Sandler started coverage of Old Republic International ( NYSE: ORI ) with a Neutral rating on Wednesday due to the expectation that profitability of the company's general and title insurance segments will suffer from a number of headwinds.
Although underwriting results of its general insurance unit was "very good" last year, 39.5% of the business is "in commercial auto where claims inflation for the industry has been rapid," analyst Paul Newsome wrote in a note.
For ORI's title insurance segment, Newsome pointed out that the slowing housing market -- driven by higher mortgage rates -- is poised to weigh on revenues. It also faces "negative operating leverage since some of its business comes from its direct channel where acquisition costs are more fixed than through independent agents."
On the positive front, the sell-side analyst praised the company's dividend yield of 3.8%, saying it has a long track record of consistent payouts. To be sure, SA's Quant system rated ORI's dividend consistency as an "A+."
Overall, the Neutral rating agrees with the Quant rating of Hold and diverges from the average Wall Street analyst rating of Buy.
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Old Republic lands Neutral rating as Piper sees profit headwinds