Owl Creek Calls On Old Republic to Unload Title Division

(Bloomberg) -- A top-ten investor in Old Republic International Corp. is calling on the insurer to implement measures to improve value for shareholders, including launching a strategic review of its title business.

Owl Creek Asset Management, which owns more than 2% of Old Republic, also called on the the company in a letter to its board Tuesday to implement measures to improve its governance and put in place a share buyback program. While the New York-based investment firm has made its views known to the company, it said Old Republic has been unwilling to explore its proposals.

“We believe that if our suggestions are implemented and Old Republic unlocks the value of its overshadowed title business, the board has the opportunity to create more than 50% in incremental shareholder value,” Jeffrey Altman, Owl Creek managing partner, said in the letter, a copy of which was obtained by Bloomberg.

A representative for Chicago-based Old Republic wasn’t immediately available for comment.

Old Republic’s shares rose 2.5% to $22.80 apiece in New York Tuesday as of 9:46 a.m., giving the company a market value of about $7 billion. The stock had gained 49% in the past year through Monday’s close.

The company’s general insurance business alone is worth more than the value ascribed to the entire business, Altman said. He urged the company to initiate a review of its title business, including a potential spin-off, sale or Reverse Morris Trust transaction to unlock that value. He argued the two segments already operate as fundamentally different businesses, and spinning off or selling the title business would allow management to focus on and invest in the general insurance segment.

He also called on the company to implement measures that would see each director stand for election every year, noting that half the board is older than the company’s suggested 75-year-old retirement age. Lead director Arnold Steiner, 82, has been on the board since 1974, he noted.

He argued the board also lacks diverse representation, and only has one female director. He called on the company to elect a truly independent chairman, improve diversity, and enforce its retirement policy, among other measures.

Old Republic should also implement a sizable share repurchase program to avoid the “unnecessary tax leakage” of its dividend-heavy returns, he said. If, for example, the company had have directed capital allocated for a special dividend last year to share repurchases, it would have been able to repurchase over 5% of its market value at extremely accrettive levels, he said.

“We believe the company’s continued refusal to address legitimate shareholder concerns with its organizational framework, entrenched board structure and severe lack of board diversity, among other topics, to be unacceptable and indicative of its historically weak and, frankly, evasive shareholder communications practices,” Altman said.

Owl Creek is the ninth largest shareholder in Old Republic, according to data compiled by Bloomberg.

The firm typically advocates privately for changes at the companies it invests in but hasn’t shied away from making its views known. In 2018, it publicly pushed for Brunswick Corp. to spin off its fitness business, which the company sold to KPS Capital Partners the following year for $490 million.

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